U.S. natural gas in 2011 and beyond
Section snippets
Japan and China
The Japanese earthquake, tsunami and resulting nuclear accident at the Fukushima power plant spawned a disaster that will be hard to remedy or forget. As usual, the events have had a number of dimensions, mostly unfortunate for that country no matter how tolerant the population may have grown from past experiences in natural or even man-made calamities.
Japan’s misery becomes the opportunity of the century for natural gas-producing countries, headed by Australia. Australian natural gas is the
World gas reserves and potential
In spite of all current challenges to gas production, we must not fail to appreciate the enormous quantity of potential recoverable gas around the globe (Fig. 3). At some price, and likely a price well below the current price of oil on an energy content basis, there are tremendous quantities of gas to be unlocked. The inescapable conclusion is that gas will continue to expand its relative importance in world energy markets. That said, we do not believe this potential can be unlocked at current
A reasoned U.S. natural gas price outlook
In the United States, rather than specific natural gas discoveries, the debate centers on the major new category of and rising tide of “shale gas.” An over-enthusiastic response by the U.S. government suggests that it believes (or at least wants to believe) this cheap and relatively environmentally benign fuel can be the magic wand for its often irreconcilable priorities: cheap energy for consumers; sustainable economic growth; energy independence and national security; and near-zero human or
Externality costs
Issues and forces that may produce costs and curtailments that negatively impact U.S. natural gas output and pricing have been gathering momentum in recent months. The term “external” connotes issues that are driven from outside the industry and therefore represent costs not currently borne by the industry. We can be agnostic toward the issues themselves, a bit like global warming, because we do not have the data needed for a quantitative analysis. At the same time, we recognize that once an
Upside demand catalysts
There are several areas in which strong U.S. natural gas demand can be anticipated as consumers and regulators re-orient to take advantage of this environmentally premium fuel and the perceived long term-bargain shale gas pricing and availability: electric power, industrial/chemical, transportation and LNG export. We estimate that together, these upside demands (which are mostly excluded from current EIA natural gas forecasts) total an enormous 31.4 Bcf per day, almost half of U.S. current
Shale production 3X-plus by 2020
Fig. 5 provides a natural gas supply stack arranged from lowest to highest cost natural gas sources, in 2011 and 2020. The lowest cost natural gas production is “Associated-Dissolved,” which is a byproduct of oil production; next is “Conventional” gas production from high porosity and permeability reservoirs; then “Shale” gas, which is essentially production from a very low permeability and porosity mudstone; then “Coalbed Methane,” or coal seam gas, which is expensive due to water disposal
Conclusion
From the analysis provided above, we conclude simply that U.S. natural prices will rise quickly to $8 per MMBtu and that world prices, on the back of major new resources that we have identified, will coalesce around a modest premium to the U.S. price. Natural gas conversion and transport technologies will ensure the convergence. Under this price environment, natural gas will resume its contemporary role as a premium world fuel based on environmental benefits and a long-term price advantage over
Acknowledgment
Portions of the analysis in this paper were performed by Papalote Ventures, LLC under contract to Zero Emission Energy Plants Ltd.