Natural Gas: The Revolution Is Coming

Abstract

Abstract Natural gas today accounts for about 22% of the world energy demand. This figure is skewed because of the 26% gas market share in the biggest consumer of them all, the United States. In Europe, outside of the former Soviet Union, with a population of 1.5 times that of the United States, gas accounts for 19% of the market. In terms of per capita energy consumption, the average U.S. citizen consumes about 2.2 times more gas than a European. These ratios both for total usage and gas market share in the energy mix became much more lopsided for almost all countries. A move toward increasing gas use is now under way, both from a demand and supply standpoint. For example, Brazil, the world's tenth largest economy with a current gas market share of 5%, has embarked into a very ambitious plan of increasing gas use. Several gas-producing countries have also announced very ambitious plans for markedly increased gas output. These include Qatar, Oman, Venezuela and, potentially the largest of them all, Saudi Arabia. Liquefied Natural Gas (LNG) facilities are currently being built, and LNG tankers are forecast to experience very serious shortages over the next three to four years. The United States has made an emphatic move toward increased gas use. Already less than 5% of electric power generation uses oil. Well over 90% of new power generation built in the United States over the next decade will be fueled by natural gas. Gas-fired turbine manufacturing is experiencing a three-year backlog. Once manufacturing catches up with demand, the transition to natural gas will cause substantial shortages for a considerable stretch of time—covering not just the traditional peaks in winter heating but also new peaks associated with summer electricity demands. More crucial, we believe that environmental concerns, real or imagined, will push the emergence of fuel cells much faster than currently envisioned. Natural gas will be in the center of this transformation, resulting in a greatly expanded market share of gas in the world energy mix, increasing to 40–50% by the year 2020. We present below a comprehensive analysis of the current state of natural gas supply and demand; we provide the conventional forecasts and rationalize our forecasts, which are heavily influenced by electric deregulation, LNG conversion and fuel cells. Introduction At the time of this writing, natural gas consumption in the United States has reached an estimated 23 trillion cubic feet (Tcf) per year. This is very near the highest consumption rate of natural gas, which was experienced in the 1972–1974 period. Figure 1 presents the history of natural gas consumption in the United States and the other G-7 countries (Canada, France, Germany, Italy, Japan and the United Kingdom).1