HOUSTON -- Natural gas is the fastest growing
hydrocarbon-based energy resource; this is the consensus of
the recent Rice University Baker Institutes Geopolitics
of Natural Gas Forum.
Mark Finley, BPs general manager of global markets and
US economics, commented that the 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 US natural gas supply. Much of
the US natural gas supply will be directed to power
generation for the mid-term.
In contrast, Chinas demand for natural gas continues to
increase. According to BPs 2014 energy outlook, China
will consume the same volume of Natural gas as Europe
by 2035. Imports and trade
will be vital to satisfying Chinas need for natural
gas. Imports will be met by pipelines from the Former Soviet
Union and LNG.
The real experiment in economics
Finley remarked that a real experiment in
economics is happening in North America. In energy markets, a
real experiment entails taking an isolated
economy, dropping in a new substantial energy supply and
witnessing what develops. In this case, the isolated economy
is the US economy and the new energy source is shale gas. In
2003, nearly 75% of the US drilling rigs were searching for
natural gas, which was deemed 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 US, the change in natural gas supplies developed in
short notice. The investments to use the new domestic
supplies are influenced by available infrastructure.
Power→ Industry→ Transportation.
Demand for electrical power is increasing for all nations,
developed and developing. In the US, the power industry had
sufficient capacity to readily handle the abundant natural
gas supplies and reacted quickly to convert from coal to
natural gas. The industrial sector has a longer reaction
time. Investments for new petrochemical facilities
have been announced,
but, grassroots facilities
will need several years
to move through engineering, permitting and construction
Even more time will be needed to integrate natural gas into
the transportation industry. Construction
of distribution and
retail centers and conversion of the vehicle fleet from
gasoline and diesel is a longer term task. New technologies
for engine conversion kits and LNG fueling stations are being
researched and developed. Acceptance by consumers will take
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
resource in the future and hold 80% of the energy mix by
2035. Crude oil, natural gas and coal will be evenly split
the energy market. At that point there will be no dominant
Growth in the energy market will continued to be influenced
competition and government energy policies.