Technology About Gas

How gas adapts to markets and technologies

 By Nicholas Newman
About gas

Recent gas discoveries in the eastern Mediterranean, offshore Africa and fracking in the U.S., alongside field extensions and improved recovery techniques, boosted world gas reserves to a staggering 6,879 trillion cubic feet (Tcf) at the start of 2016

(Cover pic by Elizabeth Dunlap)

Natural gas accounts for roughly 25 percent of global energy demand of which LNG, contributes just under 10 percent. Increasing electrification and stricter regulations on pollution have favored gas at the expense of oil and coal for power generation and industrial purposes.
The long-term outlook shows demand for gas rising while it flattens for oil and falls for coal. The biggest threat to gas comes from increasing supplies of renewables in power generation facilitated by technological advances in hybrid power plants, onsite-generation and grid-scale batteries. This feature examines some of these changes.

LNG deliveries start to the Stornoway Renard diamond mine in Northern Québec (

A dash for gas

Spectacular rising shale gas production in the U.S. alongside completion of mega LNG export projects, most notably in Qatar, Australia and now Cheniere Energy’s Sabine Pass, have created a gas supply glut and dramatic price reductions.
Burgeoning supplies of cheap shale gas have revived U.S. competitiveness in chemicals and petrochemicals, vis-a-vis Europe. Europe’s Royal Dutch Shell has therefore invested in a petrochemical plant in Pennsylvania, which on completion will produce 3.3 billion pounds of ethylene a year, a key ingredient in the production of a range of plastics including, detergent bottles and even canoes. In Europe, chemicals giant INEOS is also taking advantage of American shale gas revolution. It is currently importing ethane, by a virtual pipeline of eight dedicated tankers, for its various European facilities including, its chemical plant at Grangemouth in Scotland.

New gas markets

The increasing availability and affordability of gas is encouraging market extension. Low prices make it attractive to deliver gas to customers beyond the reach of existing pipelines, through scheduled deliveries by truck, freight train, tanker or barges. In the U.S. in particular, such virtual pipelines are delivering gas, in either LNG or CNG formats, to power on-site generators of remote mines, factories and hospitals. The Renard diamond mine, in Quebec’s Otish Mountains, is a good example of the savings that gas, delivered by virtual pipeline, can bring. By switching to LNG from diesel fuel for its generators, Renard expects operating cost savings of between $8 million and $10 million per year which amounts to $89 million over the projected 11- year working life of the mine.
The possibility of LNG tanker deliveries has enabled island communities, including Malta, Jamaica and Martinique to adopt LNG in place of more expensive and polluting diesel for power generation.
Gas is becoming the fuel of choice at the expense of polluting coal and expensive oil or diesel in the power sector in North America. Natural gas is now Mexico‘s largest source of electricity generation reaching 54 percent in 2015, boosted by the availability of cheap supplies from Texas and recent reforms of the power sector. In the U.S., gas has overtaken coal in power generation with a market share of 33.8 percent compared with coal at 30.4 percent according to the Energy Information Administration. On the other side of the world, economic development in India, China, and the rest of Asia has boosted demand for gas from a variety of suppliers including Russia, central Asia, Australia and even the U.S.

Some virtual LNG pipelines are planned or currently operated in North America, Europe, Australia and elsewhere

Gas working with renewables

Traditionally, coal, diesel, oil and gas competed against each other in the power sector. Today, technology has created hybrid power plants, which combine solar or wind power with gas peaking plants. Essentially, when renewable power fails or is too low, gas peaking plants automatically switch on to ensure the stability of the power grid. A case in point is Germany, which still relies on gas power, although at times renewables can supply nearly 100 percent of power needs. However, in January 2017, wind and solar power failed and Germany’s gas power plants were switched on to bridge the gap. According to Eon Netz, one of the four grid operators in Germany, for every 10 MW of wind power added to the system in this case, at least 8 MW of back-up power must also be dedicated.
Gas peaker plants are flexible and highly responsive to fluctuations in both demand and supply caused by the integration of renewables and changing demand. Such are their advantages for countries moving towards a low carbon economy that Belgium, France and the U.K. are currently investing in new peaker plant capacity.

UK Power Reserve is focusing on gas engines and battery storage (


The biggest threat to gas consumption arises in the power sector and potentially, large industrial and service companies. The IEA predicts that renewables will grow by about 1,000 GW by 2022 raising the share of renewable energy in the world’s electrification mix from 24 percent currently to 30 percent. In Europe, the growing importance of renewables has already resulted in the mothballing of existing large plants and a decline in investment in new gas power plant capacity. Nevertheless, gas could continue to supply either base-load or standby power. Small peaker plants, distributed across the grid, will still be needed to maintain power grid supplies and these will provide an opportunity for investors.
As for industry demand, some large companies, including Ford, General Motors and IKEA are increasingly relying on renewables. According to Professor Dieter Helm speaking at this year’s Flame conference, “increasingly, industrial customers will only be interested in fixed-priced capacity contracts to power their machines.”
For gas to penetrate new markets and increase its market share requires multi-billion investments in gas-fired capacity, pipelines and other infrastructure. Would such capital investment be forthcoming when renewables have become price competitive?
For gas exporters, including Qatar, Russia and Algeria, the emergence of energy storage, improved energy efficiency and rising usage of renewable power could cut their revenues from exporting gas to major economies like Europe, China and Japan.
Ultimately, price, government policy and technology are crucial in shaping future demand and supply of gas.

READ MORE: Global gas trade shifts by Amanda Saint

about the author
Nicholas Newman
Freelance energy journalist and copywriter who regularly writes for AFRELEC, Economist, Energy World, EER, Petroleum Review, PGJ, E&P, Oil Review Africa, Oil Review Middle East. Shale Gas Guide.