To better understand the evolving outlook for LNG and its role in the U.S. gas market, Fortnightly assembled a group of LNG specialists with various perspectives on the issues.
Clear Skies for Gas
Unconventional sources brighten the U.S. supply outlook.
Yucca Mountain in Nevada and, as a result, there is an increase in expected natural gas demand for combined-cycle plants. This was reflected in the futures market on Nov. 6, 2008. Although the two benchmark crudes dropped further to $64 and $61/barrel, natural gas futures rose to $7.29/million Btu. However, this trend reversed sharply in December 2008 and continued through the first half of January 2009 when natural gas futures dropped into the $5.00 to $6.00/million Btu range as the two benchmark crude prices dropped to their lowest levels in four years—about $37 to $46 a barrel. It is therefore reasonable to expect that even under the Obama regime, natural gas prices will remain in the $5.00 to $6.00/million Btu range, making natural gas a least-cost energy source for a variety of reasons.
It also should be noted that Natural Gas Week published a review of the American Clean Skies Foundation projection of 2,247 Tcf of natural gas reserves and potential resources in its Aug. 4, 2008 issue. 7 This review noted that the contributions of shale gas had increased from less than 1 billion cu.ft./day in 1998 to about 5 billion cu.ft/ day today. U.S. natural gas production in 2007 was about 52.81 Bcf/day according to the above-noted Energy Information Administration (EIA) estimate of 19.278 Tcf/year dated June 30, 2008. EIA also reported that onshore shale gas production in the Lower 48 States increased by 9 percent between the first quarter of 2007 and the first quarter of 2008, and that one-half of this increase was attributed to the Burnett shale in Texas, thanks to advances in gas production technologies such as horizontal drilling. U.S. proved natural gas reserves also have increased annually since 1996 thanks to an increase in total discoveries in excess of production.
Natural Gas Vehicles
It is evident that this greatly improved U.S. natural gas supply outlook will have major impacts on the use of gas not only in stationary applications, but also as a low-emission transportation fuel in compressed natural gas vehicles (NGVs), which have been advocated for many years, especially for fleet use because of the relatively lower complexity of refueling systems. Unfortunately, only moderate commercialization for fleet use has resulted. Most recently, the legendary oil man T. Boone Pickens, the BP Capital founder, proposed in a television campaign that over the next 10 years, 38 percent of petroleum use in vehicles should be replaced by compressed natural gas stored on board in spite of the higher cost of natural gas vehicles and their dependence on expensive home or fleet refueling stations. But because of the uncertain outlook for petroleum supplies and prices, as well as the growing limitations on greenhouse gas emissions (primarily carbon dioxide), a revival of this initiative is likely.
NGVs are less efficient than vehicles powered with gasoline or diesel fuel, but still have substantially lower greenhouse gas emissions. NGVs also require parasitic energy use for compression of on-board storage tanks to 3,500 psig. However, progress is being made on improving NGV efficiency and possibly lowering compression levels. 8 There also