Technological advances in the production and transportation
of natural gas are raising new opportunities for the fuel but
also challenging traditional ways of doing business in gas
markets, according to a new comprehensive report by IHS
Cambridge Energy Research Associates (IHS CERA) and the World
The report, Energy Vision Update 2011: A New Era for
Gas, says that advances in unconventional gas production
coupled with growing liquefied natural gas (LNG) trade are
changing long-standing assumptions about natural gas markets
around the world.
The unconventional gas revolution is the most
important energy development so far this century and it has the
potential to boost gas production far beyond North
America, said Daniel Yergin, IHS CERA chairman and
Pulitzer Prize-winning author of The Prize. The
resulting changes to the supply outlook and fundamental
economics of natural gas will be transformative. They can have
far-reaching impact on the electric power industry and the fuel
choices in the years ahead. Understanding what this may mean is
a top-level topic for the energy industry worldwide.
As a result of the shale gas revolution, North America has
sufficient recoverable gas to meet current levels of
consumption for well over 100 years. Global LNG trade doubled
in the decade from 2000 to 2010 and is expected to increase
another 50% or more in the next 10 years. Recent advances in technology mean that natural gas is
likely to be more available, and less expensive, than was
assumed just a few years ago.
The North American shale gale served to slow, if
not reverse, the move toward the convergence of prices and a
truly global gas market, the report says. North America is much
less dependent on LNG than was projected just three years ago,
disconnecting the market from gas prices elsewhere.
In the context of a world with increasing demand for
energy, gas is playing a critical role. It is particularly
attractive for power generation as a relatively cheaper and
cleaner source of energy, said Roberto Bocca, senior
director and head of energy at the World Economic Forum.
With many policy discussions today focusing on
emissions and carbon reduction, natural gas
represents an opportunity for progress, since a modern natural
gas plant can produce electricity with half the greenhouse-gas
emissions of an older coal-fired
Growing demand for LNG in Asia brings increasing
interconnectedness between Asian and European gas markets, Mr.
Yergin said. But with a mostly self-sufficient North
American gas market, one should expect an inter-regional,
rather than a global, market.
The surge of gas supply that occurred during the global
recession also challenged some longstanding tenets of the
worlds gas markets, particularly in Europe, the report notes. The
traditional linking of gas prices to oil in Europe, though likely here to stay,
is nonetheless evolving as long-standing gas suppliers are
offering more flexibility in contract terms and pricing to
compete with growing volumes of LNG.
In contrast to the revolution in supply, the demand outlook
for gas is more evolutionary, the report finds. The primary
uses for gas remain the samespace and water heating in
residential and commercial applications, fuel and feedstock for industrial
applications, and power generation.
Natural gas use in power generation, in particular, will be
the main source of demand growth in the future, the report
says. Natural gas is the cleanest of the fossil fuels, emitting
the least greenhouse-gas (GHG) emissions and other pollutants
than coal or oil, making it a preferred fossil fuel, given the
imperative to reduce emissions.