Technology About Gas

The rise of natural gas

 By Peter Ward
About gas

The U.S. used 81% more natural gas than coal for electricity in 2015. Natural gas generates more than half of the U.K.’s power. And China’s biggest oil company wants natural gas to account for 50% of its output by 2020. What is driving the rise of the cleaner fuel…?

(Cover photo by www.neb-one.gc.ca)

This year, U.S. carbon dioxide emissions from burning natural gas for power are set to surpass emissions from burning coal for the first time. The U.S. Energy Information Administration predicts the U.S. will emit around 1.5 billion metric tons of carbon dioxide from natural gas, compared to 1.4 billion metric tons from coal. Natural gas use has been on the rise for many years, but as it reaches this important milestone, what is driving its increasing popularity among power companies?

America isn’t the only country which is increasing the amount of natural gas it uses. A report released in August by the United Kingdom’s Department for Business, Energy and Industrial Strategy revealed that in the second quarter of 2016, natural gas accounted for over half of the power in the U.K., while coal decreased to a record low.

Natural gas was used for 50.9 percent of electricity generated by major power producers in the country, with nuclear power accounting for 24.2 percent, renewables 18.1 percent and coal way down in last place with 6.8 percent.

China is the world’s largest energy consumer, and is seeking to increase its usage of natural gas to 10 percent by 2020. Last year the Chinese government cut gas prices twice in an attempt to increase demand. Natural gas use rose 9.8 percent in the first half of 2016.

Are we entering a golden age of natural gas trade? (Imagine by MIT News)

The country’s biggest oil company wants natural gas to make up half of its output by 2020. PetroChina’s output is currently 37 percent natural gas, but it is aiming to raise that over the next four years, according to a report by Bloomberg. “We will have some adjustment on oil and gas production down the road,” PetroChina Co. President Wang Dongjin told reporters recently. “There is a huge potential for natural gas production to grow in the years to come.”

As companies attempt to meet goals to reduce emissions, natural gas has become an increasingly important resource. New technology has also meant it’s easier to extract natural gas from difficult places. Natural gas emits about as much carbon dioxide as coal when burned, and more energy is produced from the cleaner resource. Burning coal for power is about 82 percent more carbon intensive than burning natural gas.

During the second U.S. presidential debate in October, a member of the audience asked a question about energy. Democratic nominee Hillary Clinton explained her future plans for the country’s energy supply. “We are now, for the first time, energy independent,” said Clinton. “We are not dependent on the Middle East. But the Middle East still controls a lot of the prices. The price of oil has been way down, and that has had a damaging effect on a lot of the oil companies, right? We are, however, producing a lot of natural gas, which serves as a bridge to more renewable fuels.”

Clinton was describing a widely-held belief that natural gas is the best source of energy to reduce carbon emissions while providing enough power for country’s to switch to renewable sources.

Gas production in the U.S. has been on the rise for quite some time. The EIA’s Annual Energy Outlook in 2016 increased its projection for 2020 gas production in the country by 47 billion cubic meters, from the year before. This is in spite of a recent decline in gas prices.

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ThinkstockPhotos-86521407

Part of the reason for this increase in production despite lower prices is the rapid advancement of technology. In the Marcellus shale play, the largest gas field in the U.S., rig efficiency has increased nearly 40 percent of the last year. This makes it possible for gas producers to continue to extract the resource, despite not receiving the same price for it when they sell the natural gas.

Signs that further growth is expected come mostly from Europe. LNG currently accounts for about 12-15 percent of Europe’s gas demand. However, a huge number of European countries see LNG as a way to reduce their dependence on Russian gas, and have begun building the infrastructure to use natural gas instead.

But from another perspective, Europe represents natural gas’ most challenging market. In countries such as Germany, the government is unwilling to ditch the use of coal because of the political support it has and the number of jobs that will be lost. And the country is subsidizing the use of renewables, which leaves gas squeezed out in the middle. In the U.S., as Hillary Clinton points out, the government sees natural gas as a stepping stone from coal to renewable energy.

So which countries are the biggest natural gas importers? Three Asian countries: Japan, South Korea and China, account for around 60 percent of global LNG imports. Japan is the biggest importer of the liquefied version of natural gas, although the country does face some of the issues seen in Europe.

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One of the major reasons why Japan is a top importer of LNG is due to the closure of its nuclear energy program, following the disaster in 2011 at the Fukushima Daiichi plant. This left a 30 percent gap in the country’s energy supply, according to the IEA. It has been replaced by imports of coal, oil and LNG. But now nuclear power is coming back online in Japan, and the demand for LNG may not last much longer. In total natural gas accounts for 40 percent of generation currently.

Prices of natural gas suffered last year as the U.S. enjoyed one of its warmer winters ever. But this year is not expected to be so hot, and demand is set to increase accordingly. The Natural Gas Supply Association said in its winter outlook that it expected demand to increase 3.6 percent this winter, as it forecasts a 12 percent colder winter than last year.

The rise of natural gas can be attributed to several factors. Firstly, new technology allowed for cheaper extraction of harder to reach gas. This tied in with attempts around the world to reduce carbon emissions, and the push for cleaner energy in the future. While, an oversupply of natural gas, a drop off in demand and the resultant slump in prices may have slowed down the natural gas juggernaut, the signs are there that the fuel remains the best medium-term choice to help the shift to renewables. It may also be the best long-term option to provide backup to less reliable sources of energy.

about the author
Peter Ward
Business and technology reporter based in New York. MA in Business Journalism at Columbia University Journalism School 2013. Five years experience reporting in the U.S., the U.K., and the Middle East.