An Introduction to Natural Gas Growing Importance, Current Challenges
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Natural Gas Series | October 2015 An introduction to natural gas Growing importance, current challenges. An introduction to natural gas Growing importance, current challenges. Natural gas has become a key resource for global energy needs and is abundant, versatile and clean burning. It is used in power generation, for industrial applications, buildings, and transportation. Though historically it has been extracted through conventional means, unconventional extraction processes play a part in regions such as North America. Natural gas is being traded globally, facilitated by investments in transport technology and increased global demand. Future demand for natural gas is likely to grow, especially for power generation, where it can be used to replace coal power and to fill power gaps created by intermittent renewable energy sources. The content of this summary is based upon the Introduction to Natural Gas FactBook. For the complete FactBook and other FactBooks by the A.T. Kearney Energy Transition Institute, please visit www.enery-transition-institute.com. 2 Summary FactBook | Natural Gas Series | October 2015 Permission is hereby granted to reproduce and distribute copies of this work for personal or nonprofit educational purposes. Any copy or extract has to refer to the copyright of the A.T. Kearney Energy Transition Institute. Having long been overlooked as an energy source, natural gas has become a crucial part of the energy mix in the past two decades Interest in natural gas has been bolstered Natural gas was, for an extended time, an unwanted Natural gas composition by-product of oil production. Without economic methods is highly variable and of bringing it to market, gas was mostly flared or released depends on the resource’s to the atmosphere. However, in recent decades, its location. abundance and low carbon content compared with other fossil fuels have considerably bolstered interest in natural gas. Natural gas is not solely methane Natural gas is composed of a mixture of hydrocarbon components, including methane but also ethane, propane, Natural gas consists of hydrocarbon components… …and of non-hydrocarbon contaminates butane and pentane – commonly known as natural gas liquids (NGLs) – and of impurities such as carbon dioxide (CO2), hydrogen sulfide (H2S), water and nitrogen. The composition is highly variable and depends on the (Flame size indicates typical relative Helium Water Nitrogen Hydrogen Carbon resource’s location. In some fields contaminants, especially concentrations of hydrocarbon components) vapor sulphide dioxide those that characterize sour gas (CO2 or H2S), represent a high proportion of the natural gas mixture, making exploitation harder and more expensive. Sometimes NGLs Methane 70-98% account for a significant share of natural gas; a mix rich in NGLs, known as wet gas. In 2013, wet gas yielded 9 million barrels of oil equivalent a day, contributing 10% to global Ethane 1-10% liquid hydrocarbon supply. In all situations, natural gas must be processed to remove NGLs and contaminants. Propane <5% Butane <2% Pentane (Trace) Also referred to as natural gas liquids or NGLs 3 Summary FactBook | Natural Gas Series | October 2015 Permission is hereby granted to reproduce and distribute copies of this work for personal or nonprofit educational purposes. Any copy or extract has to refer to the copyright of the A.T. Kearney Energy Transition Institute. Figure 1: Natural gas development timeline Abundance and low carbon content compared with other fossil fuels have considerably bolstered interest in natural gas 1812 1885 1936 1970s 2000s First gas company Bunsen burner invented First industrial gas First combined-cycle Major development founded in London. in Germany. First ame safe turbine developed power plants with programs for compressed enough for cooking and in Switzerland a power output natural gas vehicles heating applications. independently from around 200 MW in Iran. jet engine. developed in U.S. 1785 1800 1850 1900 1950 2000 2014 UNCONVENTIONAL GAS MANUFACTURED GAS CONVENTIONAL GAS 1785 1821 1872 1915 1959 1995 First commercial use First well specically intended First long-distance natural First use of depleted Methane Pioneer Hydraulic fracturing and of manufactured gas1 to obtain natural gas drilled in gas pipeline in the U.S. reservoirs for natural shipped the rst cargo horizontal drilling led to fuel for lighting in Fredonia, New York. completed in Pennsylvania. gas storage in the U.S. of LNG from the U.S. successful exploitation of the UK. to the U.K. shale gas in Barnett, Texas. 1951 1992 First production of natural World’s largest gas eld, gas from coal beds in the UK. South Pars/North Field fully delineated across the Iran Qatar border. 1947 Hydraulic fracturing rst used in U.S. Source:Sour c UKERCe: UKE RC(2012), (2012 “The), “T developmenthe developm ofen thet o fCCGT the C andCG Tthe and ‘dash the for‘da gas‘sh f oinr thegas U.K.‘ in t powerhe U.K industry. power (1987-2000)”;industry (198 7-EIA2000 (2010),)”; E I“NaturalA (2010 )Gas, “N aTimeline”;tural Gas GE Tim (2013),eline” ;“The GE ( 2Age013 of), Gas & the Power of Networks” “The Age of Gas & the Power of Networks” 4 Summary FactBook | Natural Gas Series | October 2015 Permission is hereby granted to reproduce and distribute copies of this work for personal or nonprofit educational purposes. Any copy or extract has to refer to the copyright of the A.T. Kearney Energy Transition Institute. Natural gas is a versatile energy carrier Nonetheless, research, development and demonstration Natural gas is an energy source that can be used as efforts are under way with the aim of: expanding the In 2013, wet gas yielded gaseous fuel, but also in non-gaseous forms – for instance, uses of natural gas, especially in transport; increasing the 9 million barrels of oil as electricity after conversion in a turbine or as a liquid after available gas resource (for example, by investigating the equivalent a day, contributing conversion in a gas-to-liquids plant. Furthermore, natural potential of methane hydrates and unlocking gas resources 10% to global liquid gas is not the only primary source of methane. Methane that are currently non-economic to exploit); and minimizing hydrocarbon supply can also be produced by gasifying coal – as synthetic natural methane’s environmental footprint (e.g. by developing gas; from biomass and waste – as biogas; and through carbon, capture and storage operations, reducing methane power-to-gas conversion, from renewables and nuclear emissions and enhancing water treatment). energy. The latter two categories are seen as potential levers for reducing the carbon footprint of natural gas even Figure 2. The natural gas value chain further. Thanks to its versatility, natural gas plays a major role in all end-use sectors, except for transport. Natural gas handling is challenging Exploration & Processing, transportation, storage & distribution End use The main drawbacks of natural gas relative to other production hydrocarbon fuels are its low volumetric energy density and gaseous nature, which makes it harder to handle than solid or liquid fuels. In order to be transported, natural gas needs Pipeline to be conditioned in some way – either by compression or Electricity Generation by liquefaction. This increases shipping costs and results in limited fungibility. The global-warming potential of its main constituent, methane, presents another problem. Processing Pipeline transport Gas storage Similar to CO , methane is a potent greenhouse gas. (optional) 2 Residential or Commercial However, an equivalent quantity of methane emitted into the atmosphere impacts climate change 84 and 28 times more over 20 and 100 year horizons than CO , respectively. 2 Pipeline distribution As a consequence, methane emissions from natural gas LNG systems, if significant and not mitigated, could negate the climate benefit of natural gas compared with other fuels. Exploration Industry and production Natural gas systems rely on a complex value chain The technological landscape that makes up the natural gas Liquefaction & Transportation Regasication ecosystem is largely mature, although a few technologies processing are still in the “valley of death” of investment, when Transport capital requirements and risks are difficult to overcome. 5 Summary FactBook | Natural Gas Series | October 2015 Permission is hereby granted to reproduce and distribute copies of this work for personal or nonprofit educational purposes. Any copy or extract has to refer to the copyright of the A.T. Kearney Energy Transition Institute. Figure 3. Technology maturity curve Floating liqueed natural gas (FLNG) Gas for rail & maritime transport Upstream Marine compressed natural gas Gas-to-liquids (large scale) Midstream Gas smart grids End-use Gas-to-liquids (small scale) Floating regasication & storage unit (FSRU) Airplane gas turbine Coalbed methane production Capital Requirements x Technology Risk Capital Requirements x Technology Methane hydrates Hydraulic fracturing & horizontal drilling Liqueed natural gas (LNG) Combined-cycle gas turbine Open-cycle gas turbine Gas boilers Research Development Demonstration Deployment Mature Technology Time Note: Investment valley of death refers to two critical stages: the early demonstration stage, in which capital required tends to outstrip the resources of a typical lab and where the high technology risk deters some private-sector investors; and the early deployment stage, in which high investment requirements and further risk taking