New Report: Entering a "Golden Age of Gas"

The International Energy Agency's special report, "World Energy Outlook 2011," states that we could possibly be entering a "golden age of gas."  It's odd to think that a couple of years ago some in our area may have thought that the best chance for a golden age of gas was a new Mexican restaurant opening up, while today Carroll County and the surrounding areas are at the forefront of the American gas boom.

An article by Martin Wolf on Financial Times (ft.com) analyzes the rationale for anticipating this golden age of gas.  Here is a summary of the points in this excellent article.
At the center of the gas revolution is fracking. As the article states, the US Energy Information Administration explains that the "use of horizontal drilling in conjunction with hydraulic fracturing has greatly expanded the ability of producers to produce natural gas from low permeability geologic formations, particularly shale formations."

This innovation didn't really begin to make strides until the 1980s and 1990s under the experimentation of Mitchell Energy and Development Corporation.  Today, though, "[t]he development of shale gas has become a 'game changer' for the US natural gas market," according to the EIA.

According to EIA estimates, 860tn cubic feet of "technically recoverable" US shale gas is waiting to be pulled from the ground - enough to give the US 40 years of gas consumption all by itself at current rates.

The world's shale gas reserves are estimated to be about equal to current proved reserves, according to an examination of 48 shale gas basins in 32 countries.  Apart from the 860tn cubic feet in the US, China (1,275tn), Argentina (774tn), South Africa (485tn), and Canada (388tn) round out the top five largest identified resources.  Russia, central Asia, the Middle East, southeast Asia and central Africa were not included in this examination, so actual potential should be even larger.

What does all of this mean for the future?  BP states in its latest "Energy Outlook" that by 2030 gas might come to rival coal and oil as a primary energy source.  This coincides with the IEA "World Energy Outlook 2011," which theorizes that under its "golden age" scenario gas demand grows by 2 percent a year between 2009 and 2035 and as a result substitutes for other fuels.

Click to enlarge chart

As the Financial Times article continues, the substitution of gas for coal or oil is desirable because gas emits only a little over 50 percent as much carbon dioxide as coal and 70 percent as much as oil per unit of energy output.  Emission of carbon monoxide are 20 percent as much as from coal, and emissions of sulphur dioxide and particulates are negligible.  These facts make gas a key weapon in the battle against greenhouse gases.

However, many warn of the potential downside of the gas exploration.  Quoting directly from the ft.com article:  "The controversial aspect of the new technologies is the impact on the environment. In an article in the November 2011 Scientific American, Chris Mooney, a writer on science, notes that “horizontal fracking requires enormous volumes of water and chemicals. Huge ponds or tanks are also needed to store the chemically laden ‘flowback water’ that comes back up the hole after wells have been fractured.” A single lateral shaft requires 2m to 4m gallons of water and 15,000 to 60,000 gallons of chemicals. It is little wonder that critics allege the new technology threatens severe pollution of groundwater and is, for this reason, an environmental nightmare. The article suggests that it is not yet known whether such contamination has occurred. At this stage, it concludes, risks are uncertain. The activities of the new industry need to be rigorously monitored, everywhere.
The wisdom of proceeding rapidly with this technology globally will depend on several considerations: first, the local opportunity costs of water; second, the abilities and reliability of the operators; third, the capacity of the regulators; fourth, the benefits of any extra gas, compared with those of alternative fuels (or conservation), including for security; and, fifth, better knowledge of the impact of the technologies. To take one example, the competing demand for water and dangers of pollution might make large-scale extraction of gas from Chinese shales dangerous."

So, the difficulty is attempting to gain the reward while minimizing the risk.   Time will tell whether enough care is taken in obtaining these resources.

Read the entire Financial Times article by clicking here.

Read the "World Energy Outlook 2011" report here.

Read the "BP Energy Outlook 2030" report here.


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