The Future of Natural Gas - Coursework Example

The Future of Natural Gas Student’s Name: Course Code: Tutor’s Name: Date of Submission: Introduction Energy is one of the key drivers of most economies and the sustainer of all the industrial development that are in place today. Crude oil has been the major source of energy and thus the driver of the world’s global energy economy (Hofstrand). This has been seen since the early part of the 20th century. There are however some limitations that make people shift from crude oil to natural gas and other forms. First off, the supply of crude oil is diminishing. There are also growing concerns of global warming due to carbon emission (Hofstrand). At the center of most energy debates and talks lies the discussion of the potential application of natural gas as a clean alternative source of energy compared to coal and crude oil (MIT 3). Natural gas is a fossil fuel that is formed in the earth surface when layers of buried fossils are exposed to intense pressure and heat over a long period of time. When this happens, the energy originally incorporated plants obtained from the sun is stored in the chemical bonds in natural gas. The key component of natural gas is methane which is the lightest hydrocarbon molecule (Hofstrand). Methane is scientifically represented as CH4 (Hofstrand). Additionally, natural gas also contains traces of ethane, propane, and butane. The latter is a conglomerate of heavier hydrocarbons that are extracted from the production stream and separately marketed as Liquid Natural Gas (LNG) (Hofstrand). In unprocessed state natural gas is usually referred to as wet gas, whereas when the heavier components have been separated it is industrially referred to as dry gas. The global production of natural gas has increased significantly by 42% representing about 105 trillion cubic feet as of 2009 (Hofstrand). The amount is predicted to increase through time as a result of the expansion of the production areas and the increase in remote sensing and extraction technologies. Additionally, the demand worldwide for natural gas has recently increased with most nations seeking ways to explore their reserves of natural gas. Sources of Natural gas Thermogenic natural gas is formed through the application of heat and pressure through long periods of time is found between porous rocks in the earth’s surface (MIT 6). This fossil fuel exists in two forms associated and non-associated gas (Hofstrand). Associated gas is formed alongside crude oil as it is recovered into the surface. Generally, this is treated as the by-product of the oil extraction process. Non-associated gas on the other hand is deposited in reservoirs that do not have any oil. This means that natural gas in such deposits is the primary product. The non associated gas, accounts for 90% of all the gas that is produced in the United States (MIT 6). The non associated form is recovered using the expansion process where wells are drilled into the reservoirs. The gas then expands controllably through the pressure resistant pipes to the surface. There are two types of source descriptions with reference to natural gas: conventional sources and unconventional sources. The conventional sources are those that exist in discrete, well arranged reservoirs, which are permeable. These are suitable for the sinking of vertical wells. On the contrary, unconventional sources are those that are found in areas of low permeability such as coal beds, shale and sandstone formations (Hofstrand). The latter is distributed over a wide geographical coverage and requires horizontal wells and advanced technology. The US boasts of large Shale gas deposits making up about 20 % of total production of the natural gas in US (Hofstrand). The conventional gas reservoirs have been depleting in the US over the past few years. However, shale natural gas has been projected to increase in the next few years and could be resorted to being that there are less associated costs of production (Pirog and Ratner). The shale deposits in the US accounts for the largest reservoirs and has been predicted to have the capability to meet the demand of both the country itself as well as other countries through export (Pirog and Ratner). Benefits and Applications of Natural Gas Natural gas is a renewable source of energy that is clean and efficient (Pirog and Ratner). The fossil fuel can be efficiently stored and transported in various forms at low cost compared to crude oil. It is environmental friendly in that it has a little carbon footprint compared to crude oil and coal (Hofstrand). On average natural gas only releases 25-30% less carbon dioxide compared to oil and 50% less than the carbon dioxide released when coal is industrially or domestically used. Additionally, when used in the generation of electricity, natural gas releases around 60% of carbon dioxide less that produced by coal per every kilowatt hour produced . There is also wide coverage of natural gas reservoirs that are unutilized thus ensured supply. The proven reserve worldwide of conventional gas alone is about 187.5 trillion cubic meters. This has a reserve production ratio of 60 years and above and can sustain the natural gas supply and demand worldwide .The disadvantage of natural gas is that just like other fossil fuels, it releases greenhouse gas. When transported or handled carelessly there is high likelihood of accidents. Lastly, the gas also has health impacts especially if burnt under less oxygen supply conditions (Hofstrand). There are domestic and industrial applications of natural gas (Pirog and Ratner). It is used as a fuel in kitchen and also as fuels for vehicles (Hofstrand). Additionally, the gas is also used in the electricity generation sector. The gas has also been used in the harber process that results into industrial ammonia that has a range of applications. Natural gas can also be easily transported in gaseous form from the production areas through pipeline that is unobtrusive for the population and the environment in general. Natural gases have received a range of applications in the energy generation sector being that most of the gas powered turbines and power stations are easy, cheap and efficient to build. Pirog and Ratner agree that natural gas compared to crude oil that releases sulphur and nitrogen oxides, it does not release much to the extent of being harmful. The Economic Value of Natural Gas in the future Natural gas just like any other fuel has economic value attached to it. Most countries that produce natural gas may have a comparative advantage compared to their non-producing countries. Natural gas is cost efficient and has less carbon footprint (Pirog and Ratner). This would mean that resorting to it as the major fuel will be better for the fuel economy. First off, there will be the reduction of feedstock costs. This is because most of the industries will be able to use natural gas as a feedstock for their industrial activities (Kinnaman 1248). This will reduce the costs of products associated with such industries and thus result into global economic growths. This will also increase the number of investors seeking to enter the energy sector (Pirog and Ratner). The industrious countries that will be producing natural gas will have a competitive advantage over industries located in non producing countries that will use other sources of fuels that are costly or better still import natural gas that is yet still costly (Kinnaman 1248). This will increase the market share of such industries as there will be more exports and less imports in the countries. The reduction of gas prices in the producing regions would also cut the cost of transport as most of the transporters will be using gas that would be cost effective compared to coal and crude oil (Kinnaman 1248). Pirog and Ratner note that in regions where the gas is being produced, the likelihood of development is very high; this draws the attention of investors in various sectors such as real estate, health and communication among others. This will boost the economy of the producer countries because there will be increased market for products and channels for trade with other government. This will also be an employment avenue for a range of people either directly or indirectly. Energy has also been referred by some authors as the power of economy or the driver of the economy of any given country (Kinnaman 1245). The countries that produce natural gas will be able to negotiate better as they will be having the economic power to their advantage. The other economic value of natural gas in the near future will be employment of individuals. The low prices of natural gas will escalate a stimulus for employment in nearly every sector (Pirog and Ratner). This will raise the living standards of the people and also increase the demand in other goods. As a result of the increase in demand the economy of the countries are likely to stabilize through taxes. When natural gas is exported, there will be the tax benefits and revenues that accrue from the whole process (Pirog and Ratner). The producing countries that export will have the advantage of developing at a faster rate compared to the others. The gas extraction and exploration sector will also draw foreign direct investments as well as partnerships between the private and the public sector and thus the improvement of some other sectors that are dependent on the economy (Kinnaman 1243). The investments will also ensure that there is employment in the sector. As it stands now, there are over 24 thousand jobs created in Pennsylvania in the natural gas sector alone based on the 2009 statistics (Kinnaman 1246). However, as the demand of natural gas increases the exploration process will also expand, thus creating more slots for employment. These jobs shall either be direct; in the production firms, indirect; the supply chain or induced; supported by the expenditure of the employed. The severance taxes are also bound to increase as years progress thus increasing the states revenues (Kinnaman 1248). The US census data indicate that severance state tax of 2009 was $13.4 billion representing 2% of all the tax revenue of the state. As the demand increases and thus the production of natural gas the severance tax will increase and account for a higher percentage of the total tax (Pirog and Ratner). This will increase the compensation of the workers and the residents in the extraction regions as well as catering for their health costs (Kinnaman 1248). The retail sales will also consequently increase as well as the value of property (Kinnaman 1248). Those houses that have well established heating systems are likely to sell at higher values than the ones that lack. Additionally, the movement of goods will cost little thus reduction in prices. The overall effect of this will be the increase in customer purchase power for retail products (Pirog and Ratner). This has a direct economic impact as there will be taxes paid to the governments (Kinnaman 1248). As natural gas gets its way into the shipping industries the cost of movements of manufactured goods will reduce making it easy to flow goods from one country to another at an efficient cost. Natural gas is reliable and cost effective this will reduce the costs of electricity and thus the cost of production (Kinnaman 1247). This will make the industries have a competitive advantage since there is access to raw materials from ethane feedstock and thus reliable production and supply to meet the growing demand. The carbon fund allotted by the governments will also reduce as a result of the reduction in the amount of CO2 being produced globally (Kinnaman 1247). Foreign exchange between countries as well as good relations will be established thus fostering economic growth and further the globalization of the economy. Countries such as Middle East and Russia that are chief producers of oil and natural gas have been able to relate well and sign trade agreements with many countries that have reformed the initial trade barriers. Kinnaman (1243) opines that when more of the treaties and trade agreements occur there will be an increase the flow of goods and services to the end consumers. This will facilitate the country economies that are currently independent and performing poorly. The Uses of Natural Gas in the Future Despite the challenge posed by all fossil fuels of green house gas emission with particular emphasis on CO2, natural gas still remains the best alternative for coal and crude oil being that its carbon footprint is low compared to the two. Additionally, natural gas has economic and an environmental advantage as well as an array of uses .This is not to discredit the fact that it also accounts for some percentage of CO2 emissions (MIT 7). In the US alone 30 percent of all natural gas produced is used in the electricity power generating plants (Pirog and Ratner). The gas powered plants have the capacity to produce peaking amounts of power and can inherently respond to the elastic supply and demand. 40 % of all the power generated in the US in 2009 was accounted for by the natural gas power plants. The only cost effective way in complying with various environmental treaties; to reduce the emission of CO2 from anthropogenic activities, is to replace the coal powered plants with gas-fired power plants (MIT 7). This has been predicted by scientists to reduce the emission of CO2 from the power plants. The advancement of technology has made it possible to generate power and heat simultaneously. This process is called cogeneration or combined heat and power. Cogeneration systems have been predicted to increase in the near future based on their efficiency (Pirog and Ratner). Another technology that is currently being tested and has proved efficient is the trigeneration system that combines heating, cooling and power production processes (Pirog and Ratner). This will not only aid in transforming the industrial sector but also help in cutting down the rates of carbon emissions. The combined-cycle natural gas power plants will allow future economies to have minimum costs for electricity and thus goods (Hofstrand). The natural gas power plants are economical and easier to build compared to the other power plants, taking about three years only compared to even five years for coal power plants. The rate of kilowatt and carbon dioxide generated from the gas powered plants is reduced by 80% (MIT 9). Additionally, the gas turbines can be turned on and off thus making the regulation and control over power easier. This automatically makes the natural gas a choice for future power generation. In the industrial sector coal has been used for a long time in the boiler fleets. However, to increase the efficiency and thus productivity alongside costs minimization natural gas shall be applied in the industrial sector (Pirog and Ratner). This will see the less efficient coal boilers with super-high efficiency boilers that have an energy efficacy of 95% (MIT 8). Additionally, the use of natural gas in industries shall ensure the compliance with the hazardous air pollutants reduction regulations especially for industries. This will additionally reduce the carbon footprint from the industrial sector with a great percentage. Natural gas liquids and natural gas itself are the primary feedstock of the chemicals industry (MIT 8). The natural gas will be used in the generation of hydrogen and ammonia gases that have wide range of applications in the industries and the health sectors. Additionally, with the revolution of agriculture, natural gas will benefit the production of ammonia fertilizers that are largely needed by large and small scale farmers in their farms. The hydrogen gas itself is used as a fuel; in most cases it can be converted to electricity through the use of fuel cells that combine the hydrogen and oxygen to produce electricity (Hofstrand). The use of hydrogen to generate electricity may supplement the energy needs of the future economies. The hydrogen is also used in fueling vehicles that are energy efficient and do not pollute the environment as would the fossil fuels (Pirog and Ratner). This will not only increase the sustain agriculture, but also ensure that there is enough food in the stores for the well being of the populations across the world (Pirog and Ratner). There has also been the expanded use of combined heat and power in the industrial sector and as demand rises, the use of natural gas in the manufacturing will ensure efficient and cost effective production of goods. In the US, residential and commercial uses of natural gas accounts for one third of all natural gas consumption. In the EU 80 million homes consume gas for heating and cooking. Natural gas is used in buildings for space and water heating as well as cooking (Pirog and Ratner). Half of all the homes are using natural gas for cooking in the US; this has been predicted to increase following the advantages as well as the ensured supply of natural gas in the country (MIT 6). The current buildings are being fitted by gas heating systems. The homes too are being fitted with furnaces that use gas for efficiency. As the world reforms and all countries try to reduce the effects of green house gases. The fuels used in the transport sector will have to be substituted. As a result natural gas will be the best alternative as proved by efficiency tests conducted by most car manufacturers. Compressed natural gas also known as CNG will be used as a transportation fuel especially in the public transit. Currently only 0.5% of all vehicles in the US use natural gas and this represents about 5 million barrels of oil that has a larger carbon footprint compared to natural gas (Pirog and Ratner). The compressed natural gas produces little carbon monoxide and other harmful gases. The only limitation would be the space required to contain the gas cylinders as the gas has low energy density. However, this will be catered for through using it on large tracks and buses that can offer the large storage areas. In the same transport sector, there will be lower-carbon shipping across the seas especially for shorter distances. This is because the Liquefied natural gas (LNG) has been demonstrated to be compatible with the ship engines that are currently consuming coal. There are predictions that by 2020 most of the ship owners would have turned to natural gas as the source of fuel for their ships. The Future of Natural Gas in the USA America is one of the countries that have been able to tap on her natural shale gas reservoirs. The country’s energy boom has been predicted to take root as natural gas slowly replaces coal in the energy production sector by the end of 2015 (Pirog and Ratner). The natural gas production has been forecasted to increase by 56% by 2040 (Pirog and Ratner). There are predictions that by 2040, 35% of all energy consumed in the US will be from natural gas supplementing the 32% prediction of energy output from coal (Kumar, Kwon, Choi, Cho, Lim, and Moona 4101). The USA has innovated new ways of extracting natural gas from shale. The technology that combines hydraulic fracturing and horizontal drilling has been able to enable the country tap into enormous deposits of natural gas in the earth’s interior. USA has been a stable natural gas producer in the last 100 years and this technology would maximize the amount of natural gas that is currently on demand within the US and beyond its borders (Pirog and Ratner). The low natural gas prices and the recent escalation of the cost of operating coal powered electricity plants will make the US resolve to natural gas as the only alternative. The statistics provided by the Energy Information Administration (EIA) based on policy and information indicates that in 2011 natural gas was the most produced fuel in the United States. The EIA has projected that in between 2010 and 2035 there will be a 28% growth in the production of natural gas (Kumar et al. 4101). In this 49% shall be accounted for by the shale gas, up from the 23% of shale gas produced in 2010 (Pirog and Ratner). Due to the demand of natural gas as well as the improvement in transportation technology for natural gas, the US shall be able to transform from being a net importer to a net exporter by the end of 2022 (Pirog and Ratner). There is also a projected increase in the number of households in the US using natural gas in heating and cooking systems, this comes with the revolution of the construction industry so as to use cost efficient energy. This will increase the demand of natural gas supply that is readily available in the US. The EIA also project that the reservoirs of natural gas in the US are very stable and widespread as US is ranked close to other worldwide producers such as Middle East and Russia (Pirog and Ratner). The policies formulated in the US on environmental protection would also make natural gas as an alternative to coal and oil that have a larger carbon footprint and degrade the environment compared to natural gas (Pirog and Ratner). Most of the energy power plants that are being built currently are turning to natural gas powered plants so as to ensure that there is cost reduction. There is also the need to sustain the transport sector with fuels that are least harmful to the environment (Pirog and Ratner). This will catapult the demand of natural gas in the US. There are policies that are underway to ensure that all the cars are converted to natural gas powered engines. US being a signatory of the environment treaties will have to resolve to natural gas so as to conform to the requirements laid out (Pirog and Ratner). Natural gas demand in America is estimated to increase by 2.3% annually. This would mean that the demand will stand at 8.6 trillion cubic feet in 2025, from 4.6 trillion cubic feet recorded in 2007. The consumption patterns of natural gas in the US are thus high. This means that the country has to ensure that all the natural gas resources are utilized so as to maximize the output and meet the demand. Presently the consumption stands at 26.2 TCF compared to 22.6 TCF in 2000 (Kumar et al. 4101). The value has been projected to expand to 24.o TCF from the 20.5 TCF estimated consumption in 2010 (Kumar et al. 4102). As can be seen, the demand increases and so does the need to supply more. With the large reservoirs US is able to sustain the projected future demands without stretching the resources and could be backed up with the import from other natural gas producers (Pirog and Ratner). This will actually fill in the gap between production and consumption in the country. However, the net imports will reduce significantly due to the discovery of shale gas and the corresponding development of extraction technologies. Conclusion The global energy economy has been hit by many challenges that then make the use of renewable sources of energy as the best alternative. Natural gas is one of the renewable sources of energy that has a low carbon footprint compared to other fossil fuels. It is used industrially, commercially and domestically used. There are many benefits as well as disadvantages of natural gas as seen in the paper. However, compared to other sources of energy, natural gas stands a chance of being referred to as the source of energy of the future. This is due to the vast number of economical value attached to it that will ensure a brighter future for the globalized economy. Some of the economic value of natural gas includes the creation of employment, drawing investors into producer countries, generating taxes thus the stability of economies and reduction of production costs. Additionally, there will also be an increase in the number of investors in various sectors of the economy thus the development of the producer countries. The developed state means a stable economy. All these and other identified factors in the paper, of economic significance are future oriented and make natural gas a viable source of energy. The advancements in transportation and extraction technology come at an opportune time to take care of the up surging demand of natural gas. The future of natural gas in the US is assured based on the statistics given by the EIA as shown in the paper. The future potential uses of natural gas have also been identified with respect to the energy, transport, industries, domestic and the commercial sectors. It is worth noting that, however much natural gas is a fossil fuel it emits less CO2 compared to other fossil fuels making it a viable source of energy. Despite the few criticisms of the extraction methods, natural gas should be explored and tapped for the sustainability of the environment and the economy for the best of future generations. Works Cited Hofstrand, Don. "The Role of Natural Gas in Tomorrow's Energy Economy." Agricultural Marketing Resource Center. Ag Marketing Resource Center, Mar. 2010. Web. 26 Apr. 2015. Kinnaman, Thomas C. "The economic impact of shale gas extraction: A review of existing studies." Ecological Economics 70 (2011) 70.2011 (2011): 1243–1249. Web. 26 Apr. 2015. Kumar, Satish, Hyouk T. Kwon, Kwang H. Choi, Jae H. Cho, Wonsub Lim, and Il Moona. "Current status and future projections of LNG demand and supplies: A global prospective." Energy Policy 39.2011 (2011): 4097–4104. Web. 26 Apr. 2015. MIT. "The Future of Natural Gas: An Interdisciplinary Study." MIT Study on the Future of Natural Gas. MIT, n.d. Web. 26 Apr. 2015. Pirog, Robert, and Michael Ratner. "Natural Gas in the U.S. Economy: Opportunities for Growth." Congressional Research Service, 6 Nov. 2012. Web. 26 Apr. 2015. . Table of Contents Introduction 2 Sources of Natural gas 3 Benefits and Applications of Natural Gas 4 The Economic Value of Natural Gas in the future 6 The Uses of Natural Gas in the Future 9 The Future of Natural Gas in the USA 12 Conclusion 15 Works Cited 17 Table of Contents 17 Read More