Natural Gas Facts & Figures from MIT

by Marlo Lewis on July 20, 2011

in Blog, Features

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 Yesterday, I excerpted some key facts and figures presented by Acting EIA Administrator Howard Gruenspecht at a Senate Energy and Commerce hearing on the future of natural gas. Today I summarize some of the main points presented in testimony by MIT Professor Ernest Moniz.

Global Gas Resources — Scale and Cost

Global natural gas resources [including resources not economically recoverable at current prices] are estimated to be between 12,400 trillion cubic feet (Tcf) and 20,800 Tcf, with a mean estimate of 16,200 Tcf. For perspective, 2009 global gas consumption amounted to 109 Tcf. These estimates do not include shale gas outside of North America. EIA recently estimated that an additional 5,300 Tcf of shale gas exists in regions lacking large conventional resources.

Much of the global resource base can be developed at relatively low prices. Globally, over 4,000 Tcf can be developed at or below $2.00/MMBtu, with 9,000 Tcf at or below $4.00/MMBtu. For perspective, yesterday (July 19, 2011), U.S. natural gas traded at $4.53/MMBtu on the New York Mercantile Exchange (NYMEX).

Unlike oil, the cost of transporting gas long distances (via pipelines or in tankers as liquefied natural gas [LNG]) is high. An additional charge of $3.00-$5.00/MMBtu is required to cover transport costs.

 Global Gas Production – Recent Trends

Over the past two decades global production of natural gas has grown by almost 42% overall from approximately 74 Tcf in 1990 to 105 Tcf in 2009. This is almost twice the growth rate of global oil production during the same period.

The most rapid growth was in the United States and Russia.

Greater production has expanded gas markets and cross border trade. From 1993 to 2008, global cross-border gas trade almost doubled, growing from 18 Tcf (25% of global supply), to 35 Tcf (32% of global supply). Most cross-boarder gas movements have historically been via pipeline. However, LNG plays an increasing role. In 1993, 17% of cross-boarder gas trade was via LNG. By 2008 the proportion had increased to 23%, and the absolute volume had increased by 5 Tcf, or 166%.

U.S. Natural Gas Supply – A New Paradigm

Two technologies — hydraulic fracturing (“fracking”) and horizontal drilling — have rapidly increased natural gas production from shale formations. The proportion of total U.S. gas production coming from shale resources grew from less than 1% in 2000, to 20% in 2010. By the end of 2011, this is expected to reach 25%. Shale gas now makes up an estimated 36% of all U.S. gas resources.

U.S. Shale Gas Resource – Uncertainty and Relative Economics

MIT’s mean estimate of recoverable shale gas volumes is 630 Tcf, or just over 30% of all U.S. gas resources.

Shale gas is “moderate cost gas,” not “cheap gas.” Of the 900 Tcf of U.S. gas recoverable at or below $8.00/MMbtu, 470 Tcf is shale gas.

Of U.S. gas available in the “moderate” price range of $4.00-$8.00/MMBtu, over 60% is shale.

Shale Gas Development – Environmental Concerns and Impacts

“The risk of groundwater contamination via gas migration or from the drilling fluid [used in fracking] can be effectively dealt with if best practice case setting and cementing protocols are rigorously enforced.” [For more on this issue, see the House Science Committee May 11, 2011 hearing on hydraulic fracturing technology.] 

MIT recommends:

  • Regulatory best practices should be applied uniformly to all shale plays.
  • Complete public disclosure of all fracture fluid components. [For more on this issue, see here and here.]
  • A DOE-EPA study to assess claims that fracking releases more methane — a potent greenhouse gas [GHG] — than conventional gas production. [For more on this issue, see here, here, and here.]

The Role of Natural Gas in a Carbon-Constrained World

MIT modeled the energy market impacts of a global GHG control regime requiring a 50% reduction in industrial country emissions below 2005 levels by 2050, with no offsets; a 50% reduction in large emerging economy emissions by 2070; and no emission reductions from least developed countries. Driven by “ruthless economics,” MIT’s model projects:  

  • Significant demand reduction from business as usual.
  • Significant increase in natural gas consumption.
  • Total displacement of coal generation with natural gas by 2035.
    • Among the reasons: “Carbon capture and sequestration (CCS) is too expensive to make inroads for many decades.”
  • By around 2045, natural gas becomes too carbon-intensive to meet the GHG reduction targets, and starts to decline. Nuclear scales up to replace gas in MIT’s pre-Fukushima model run.

 

Natural Gas Substitution for Coal in the Power Sector

U.S. natural gas generation has a bigger “nameplate capacity” (technical, full-load sustained output) than does U.S. coal generation, but gas supplies only 23% of our generation compared to 44% from coal. “This demonstrates that there is significant unused natural gas capacity,” Moniz writes. [Comment: It also demonstrates that coal is a better buy!]

Natural gas combined cycle [NGCC] generation units in the USA in 2009 had an average “capacity factor” (the ratio of actual output over a period of time to nameplate capacity) of only 42% but they are capable of capacity factors around 85%. Although relatively inexpensive to build (compared to nuclear and coal power plants), natural gas plants “typically have the highest marginal cost (although that is changing) and tends to get dispatched after other sources of generation. This is because marginal cost is dominated by fuel cost.” In other words, the cheapest power is dispatched first.

MIT estimates that an environmental policy requiring the dispatch of surplus NGCC before coal would:

  • Reduce CO2 emissions by 20%
  • Cost $16 per ton of CO2 avoided
  • Reduce mercury emissions by 33% and nitrogen oxide (NOx) emissions by 32%
  • Increase natural gas consumption by 4Tcf

Moniz clearly favors this policy. His testimony does not estimate the impacts on consumer electric rates or natural gas prices.

Natural Gas Substitution for Coal in the Industrial Sector

Industrial consumers account for about 35% of U.S. natural gas demand. About 85% of industrial demand is the manufacturing sector, and 36% of manufacturing demand is for industrial boilers. In other words, about 11% of U.S. natural gas demand is for industrial boilers. Around 68% of large industrial boilers are coal fired.

EPA’s Boiler MACT (maximum available control technology) Rule (proposed and then withdrawn for reconsideration) assumed that manufacturers would retrofit coal boilers with post-combustion emission controls rather than switch to natural gas boilers. However, says Moniz, ‘The price of gas assumed in the EPA analysis was $9.58 per MMBtu in 2008; today’s price is less than half that.” Using EPA’s methodology but plugging in current gas prices, MIT concludes that it costs less to comply with MACT by replacing coal boilers with super high efficiency natural gas boilers than by retrofitting coal boilers.

Gas Substitution for Electricity in the Buildings Sector

U.S. buildings, both residential and commercial, account for about 40% of total national energy demand. The Department of Energy (DOE) has historically set building and appliance efficiency standards based on “site efficiency” — how much useful energy is provided on site versus how much retail energy is consumed. A more accurate measure, Moniz argues, is “full fuel cycle or ‘source’ efficiency (accounting for all energy used to extract, refine, convert and transport the fuel as well as the efficiency of the end use appliance).”

For example, using a site calculation, a gas furnace consumes 10% more energy than an electric furnace. When source energy is considered, an electric furnace consumes 194% more energy than a gas furnace. Moniz recommends incorporating such considerations in energy efficiency standards, though he cautions that fuel cycle standards are “complicated to establish because of regional climate and regional electricity supply mix.” [Comment: All coercive efficiency standards have serious downsides (see here, here, here, and here). But note the implication of Moniz’s analysis: DOE efficiency standards are promoting inefficiency!]

Vernon A. Cornell July 20, 2011 at 9:46 pm

Sir:
You say that NGCCs ran at 42% of capacity in 2009.
They can run at 85%…
You also say that marginal cost keeps them at a lower
number, (although that is changing)….
That HAS changed, and we’re swimming in “excess” capacity
to produce natgas… One company in Texas is actually
converting its import terminal to export.
So we can continue to see $4 natgas….for a long time to come.
How does that compare to coal? Which is streched to get enough
to China and India….at profitable prices.
Those natgas NGCCs capfacts are going up and then up again.
(And so will the less-efficient natgas burners…)
Sincerely…Vern Cornell

Peter Nguyen July 31, 2011 at 9:38 am

I have always believe in exploring, investing, developing, and utilizing a much cleaner (green energy) and viable energy resources like natural gas, solar, wind…as to reduce our dependent on foreign oil, CO2 reduction, and the likes to help us sustain our voracious appetite for energy resources for many generations to come. I especially like to see much more investments and development of ways to harnish free and abundant solar and wind energy, for example, thus making it more readily and feasible for industries and the masses, too.

Without clear objectives, progressive governmental energy policy in place, and “forward thinking,” our energy future will be dim and life as we know it today may cease to exist in a not too distant future.

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