No Back Seat For Natural Gas At WGC

If you had to use three words to describe the atmosphere at the 24th annual World Gas Conference in Buenos Aires, they might have been “brimming with optimism.”

As most of the world still struggles to emerge from the deep economic recession and tries to cope with the new and increasing demands of global climate control, it is abundantly clear natural gas will play a vital role on both counts.

One phrase you didn’t hear at the conference was the use of natural gas as the “bridge” fuel until prospective non-fossil alternatives take over. Today, with a seemingly unlimited supply of natural gas coupled with stricter environmental mandates designed to combat global warming, many proponents insist natural gas should be “the baseload fuel for the 21st century.” They are quick to point out the drawbacks of intermittent wind and solar power among other suggested renewables. But are they truly realistic in their appraisal of natural gas? As noted author and consultant Dan Yergin pointed out, for natural gas to transcend all other fuels it must become a useful transportation fuel.

Yet even Yergin could not avoid staring out the windows of Argentina’s Royal Convention Center and noticing that a large percentage of the city’s vehicles, particularly cabs, are fueled by compressed natural gas. Indeed, nearly 2 million cars in Argentina (15%) are fueled by compressed natural gas and the air of this teeming metropolis of 12 million seems remarkably clean. Granted, that here, as in other countries where natural gas is used as an automotive fuel, government subsidies give it a big advantage over gasoline.

The big questions that ultimately emerged were how much natural gas is out there and what are we going to do with it? Apparently there is much more than anyone thought possible. The Colorado School of Mines’ Potential Gas Committee reports recoverable volumes in the United States have risen nearly 60% in the past four years to 2.074 Tcf. As evidenced by the low prices for natural gas in the U.S., there is no longer a need to import new supplies.

At a press conference, Tony Hayward, chief executive of BP, said it was clear that a “quiet revolution” was thanks to unconventional gas development, particularly in North America where BP is a major producer. Still-to-be-found unconventional gas could contribute another 4,000 Tcf to reserves over the next few years, he said. This would add 60% to BP’s 2008 estimate of conventional world gas reserves of 6,500 Tcf.

Yergin’s HIS CERA group said Hayward’s 4,000 Tcf estimate is at the bottom of his firm’s estimates for unconventional gas. He said their top estimate is 16,000 Tcf, or a 250% increase in reserves.

What’s fueling this quiet revolution that may eventually change the balance of the global energy picture? New drilling technologies that allow developers to reach enormous deposits of shales, coal-bed methane and tight formations at much lower costs than were originally anticipated.

Rhodri Thomas, unconventional gas service project manager for Wood MacKenzie, said unconventional production in the U.S. lower 48 has risen from 33% of total output in 2000 to 59%, and this is expected to rise to 73% in 2020. North America now has the potential to be self-sufficient in natural gas over the next decade or more.

Oddly, even though LNG is playing its designed role as a swing fuel available to the neediest and highest bidder, basic regional differences have complicated efforts to create a truly global natural gas market.