Natural Gas: Alternative Energy Source 2 comments
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So much attention has been paid to the discussion of exotic alternative sources of fuel such as ethanol, hydrogen etc that the most economical crude oil alternative has receded into the background. Yet natural gas is what is being used today in the most efficient power plants in the world, the combined cycle gas turbine plants. This is incumbent technology that has already proven itself.
The fact is that alternative fuels that power transport (ie. diesel or petrol substitutes) tend to receive more attention since this sector provides the highest profit margins. Natural gas is mainly used for two main purposes: power generation and home use (heating/cooking) (in a ratio of about 70-30 in the US). Although rare, there are already vehicles running on natural gas/CNG (compressed natural gas), even in Singapore, the so-called hybrid cars.
Natural gas is available through two main modes of transport, similar to crude oil. It can be run through gas pipelines (even across seas) or it can be liquefied into LNG (liquefied natural gas) for transportation by LNG carriers. The former is obviously a better choice if the source supply and demand catchment area are in close proximity, but LNG is fast becoming a more feasible source due to geographical mismatch between the two.
Key producers of natural gas are the Middle East (again), Indonesia, Australia, Russia; there is some distance of these main sources from the key demand centres. Traditionally Northeast Asia, in particular Japan, Korea and Taiwan, have been dominant consumers of the LNG market. The supply situation for crude oil is undoubtedly tight now but natural gas, apparently, is in abundant supply; the implication that natural gas could become an increasingly economical fuel alternative has not been lost on key demand markets and has led them to invest in LNG infrastructure and to secure long-term natural gas supplies. These include the US, China, India and western Europe.
The infrastructure in question would be LNG production and offloading(at source) facilities and receiving(at destination) terminals, storage facilities, and of course the LNG carriers that would transport the LNG. There are many signs that investment in such infrastructure is accelerating. Middle East countries and Southeast Asian producers (Indonesia, the world's largest LNG exporter, and Malaysia) have been expanding existing and building new export terminals, the US may finally be embarking on plans shelved earlier (due to environmental concerns) to build new receiving terminals on its West Coast, several Western European countries are actively exploring building and expanding receiving terminal facilities. For LNG carriers, the world fleet of LNG carriers is about 200 in total (see The World Fleet of LNG Carriers) but the order book for new LNG carriers over the last 2 years alone has been about 150 (see The Order Book of LNG Carriers). That suggests an explosion of supply which would not be good for the margins of existing LNG carriers but is strongly suggestive of the optimism surrounding the long-term demand for LNG. Even Singapore is getting in on the act, with its recent announcements on feasibility studies to build an LNG receiving terminal, storage facilities, as well as new pipelines to bring in natural gas (awarded to Keppel Gas).
References:
(1) International LNG
(2) News article Nov 15 05: New Direction for Natural Gas
(3) News article Apr 12 05: Too Late in Singapore LNG Race?
(4) Wikipedia entry: Combined cycle
posted by DanielXX at Monday, October 31, 2005
2 Comments:
danielxx,
I think Crude Oil still has its advantages due to its numerous uses besides fuel. Natural Gas is only good for fuel.
Just my personal opinion.
Natural gas is going to be big. I attach an article below for your reading.
Natural Gas is Going Global
(by Jim Landers The Dallas Morning News Friday, January 06, 2006)
The Russians raised a ruckus in Europe this week by halting natural gas deliveries to Ukraine in a pricing dispute.
For now, we can toss our toast heels at Moscow for such behavior without fearing for our own wallets or heating supplies. But that will soon change.
Natural gas is becoming a global commodity.
Like oil, cargoes of gas are moving across oceans as prices respond to bids in Europe, Asia and the Americas.
The United States is quickly increasing natural gas imports as production at home declines. Soon enough, a political interruption of natural gas deliveries aimed at somebody else will hit home by raising the global price.
Bad for reputation
These sorts of disruptions are rare because politicians in energy-exporting countries quickly learn that a reputation for unreliability sends buyers elsewhere. Arab oil producers staged an embargo in 1973-74 and launched a boom in oil exploration everywhere else.
Russia's pricing argument got political when it curbed pipeline gas deliveries to Ukraine on Jan. 1. The same pipeline also carries Russian gas to Western Europe.
Ukraine continued taking gas from the pipeline, which meant the curtailment was felt by Germany, Austria, France and others.
Russia accused Ukraine of stealing gas, but the European Union said Russia was being irresponsible and proving itself an unreliable source of energy.
Russia and Ukraine patched up their price quarrel, and pipeline deliveries resumed Wednesday. Natural gas prices changed little in the face of this short-term disruption -- except in Ukraine, which will soon pay Russia quite a bit more than the old, subsidized price for natural gas.
Gas supplies are more often disrupted by natural causes, such as the devastating hurricanes Katrina and Rita. Nearly 20 percent of natural gas production from offshore fields of the Gulf of Mexico is still shut in due to the summer hurricanes.
This has kept spot-market prices for natural gas at levels two to three times higher than they were a year ago.
LNG to the rescue
Shiploads of liquefied natural gas -- chilled to 260 degrees below zero -- from Trinidad and Tobago, Algeria and a few other nations are replacing that lost U.S. production.
U.S. gas companies are buying many of these cargoes at spot-market prices, however, and two shiploads already have been bid away by European buyers.
In the future, these cargoes will come in under long-term contracts. By 2025, under a forecast by the U.S. Energy Information Administration, imports of liquefied natural gas will increase sevenfold and account for more than 15 percent of natural gas consumption.
Others are forecasting even greater dependence on imported natural gas as the United States enters the global natural gas market.
"We are already part of a global marketplace in many respects," said Bill Cooper, executive director of the Washington-based Center for Liquefied Natural Gas. "We import a significant amount of gas out of Canada. And we do see LNG cargoes coming into the U.S. today, subject to a global price mechanism, and we expect that to increase over time."
Project in Peru
Next week, President Alejandro Toledo of Peru and Hunt Oil chief executive Ray L. Hunt will break ground on a $1 billion liquefied natural gas terminal on the Pacific Coast south of Lima.
Within four years, the Peru LNG project is expected to begin gas deliveries to buyers in California, Mexico and other Pacific markets.
Hunt also expects to export liquefied natural gas from faraway Yemen to the U.S. Gulf Coast, despite its quarrel with that Arab nation over Yemen's expropriation of Hunt's share of a prize oil field there.
Prices could fall
Exxon Mobil Corp. is working to export liquefied natural gas from Qatar to a Corpus Christi LNG terminal that won federal regulatory approval in December. Work began on another LNG terminal in Freeport, Texas, a year ago.
Reliance on imports creates anxiety about disruptions and price spikes beyond our control. But as natural gas becomes a global commodity, prices could come down rather than spurt up beyond their already-heady levels.
There's plenty of natural gas in West Africa, Russia and the Persian Gulf. As that gas comes onto the market, it should knock down price spikes caused by shortages and depletions elsewhere.
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