More than 80 percent of the world's energy consumption depends on fossil fuels. However, the oil, coal, and natural gas that serve the majority of our energy needs present different challenges in terms of production, transport, scarcity, and greenhouse gas (GHG) emissions.
Natural gas has been viewed as environmentally preferable to other fossil fuels due to its lower level of GHG emissions; per unit of energy generated, natural gas combustion emits an average of 42 and 16 percent less carbon dioxide (CO2) than coal and oil, respectively. However, the transport of natural gas is more expensive than other fossil fuels, and some studies estimate that gas leakage on poorly maintained pipelines could result in substantial emissions of methane, another GHG.
Demand for natural gas is projected to increase by 2.4 percent per year between 2003 and 2030, compared to 2.5 and 1.4 percent for coal and oil respectively.
Global CO2 Emissions by Fuel Source (1971-2003)
Between 1971 and 2003, natural gas production increased nearly 150% to the equivalent of 2.25 billion metric tons of oil. In 2003, natural gas accounted for roughly one-quarter of the energy produced by fossil fuels and one-fifth of the CO2 emitted by them.
Source: Earth Trends, 2007 using data from CDIAC, 2006.
Market Differences between Natural Gas and other Fossil Fuels
Compared to oil and coal, natural gas has a very different market path and commercialization. It is expensive to store in large quantities, and the cost of transportation through pipelines accounts for almost 50 percent of the final consumer price, compared to 5-10 percent for oil. Since transportation costs increase with distance, combustion of natural gas is only economically viable up to 3,000 kilometers from the point of extraction. As a result, it is predominantly traded at the regional level, and no global market or standard pricing mechanisms exist. Instead, gas prices are set at the "city gate," a geographic point agreed upon by the exporting and importing parties.
The Liquefied Natural Gas Market Option
Liquefied natural Gas (LNG) is natural gas in its liquid form, achieved by reaching temperatures of minus 259 degrees Fahrenheit (-161 degrees Celsius). Unlike traditional natural gas, LNG has the potential to be traded at the global level through storage facilities and ships that are specially designed to tolerate low temperatures. Although production costs are among the highest of any fossil fuel, technological improvements have reduced costs by 35 to 50 percent over the last 10 years. As a result, the LNG market is expected to double in size by 2010 to more than 40 percent of the world's natural gas supply, compared to 26 percent in 2005. Almost 90 percent of the world's potential natural gas reserves are beyond pipeline export reach, indicating an enormous potential demand for LNG technology.
Global Trade in Natural Gas 1970 to 2020 (projected)
Data correspond to cross-border volumes in billion cubic meters (bn cm).
Trade in liquefied natural gas has outpaced overall natural gas trade, accounting for only 5.9% of all international trade in 1970, but predicted to comprise 37-38% of all natural gas crossing national borders by 2020.
Source: Price Water House Coopers, 2007. The Value and Growth in the Liquefied Natural Gas Market
RELATED LINKS :
BP Statistical World Review of Energy, 2006
Carbon Dioxide Information Analysis Center
Energy Information Administration. The Global Liquefied Natural Gas Market: Status and Outlook
Energy Information Administration. International Energy Outlook 2006
International Energy Agency. Publications and Papers
International Energy Agency. South American Gas: Daring to Tap the Bounty. (pdf file)
Inter-American Development Bank. A Blueprint for Green Energy in the Americas
Price Water House Coopers Publications
U.S. Department of Energy: Alternative Fuels Data Center
Earth Trends
October 2006 Monthly Update: Fossil Fuel Consumption and its Implications
