Gas to remain major source of energy as demand jumps

Natural gas, the cleanest of the currently available fossil fuels, is likely to keep its place as a major energy source with consumption growing at around 2.5% a year over the coming decades, analysts say.

The world has enough proven natural gas reserves to last 64 years at 2005 consumption levels, compared with only four decades worth of oil, according to the BP Statistical review.

Much of the world’s estimated 180tn cu m of gas reserves are deep under the sea, in vast deserts or politically unpredictable countries. Russia, Iran and Qatar account for 27%, 17% and 14% respectively and 58% of the total lies in former Soviet Union countries.

Getting that gas to consumers will become increasingly easier with new pipelines and liquefaction plants, which cool it to liquid form so it can be shipped anywhere in the world. Much of the demand growth is spurred by the power industry, where the latest combined cycle gas turbines make gas-fired electricity generation ever more efficient.

Gas was producing 20% of the world’s electricity in 2004, up from 12% in 1973, figures from the International Energy Agency (IEA) show. Its share of total final energy consumption rose to 16% from 14.6% over the same period. The IEA sees gas supplying 21.5% of the world’s total primary energy in 2010 and 24.2% in 2030.

In Europe, gas should be the fastest growing fuel source in the next two decades because of demand from new power stations, but as Europe becomes more addicted to gas, concerns about security of supply mount.

The steady decline in British and Dutch gas production means northern Europe increasingly relies on Russia’s Gazprom, as many of the former Soviet states already do. Gazprom’s price hikes, its move to turn off the gas taps to Ukraine last winter and threat to do the same to Belarus this winter show how dangerous that reliance can be.

“Europe has woken up to the seriousness of the situation,” economist Dieter Helm of Oxford University said in a paper on European energy policy published in December.

The European Union has proposed measures to reinforce connections between countries so states can help each other in an energy crisis. A new Baltic pipeline will bring Russian gas direct to Germany from 2010, bypassing former Soviet countries.

Spain and Italy are in a better position because they have pipeline access to Algeria, which has 2.5% of world gas reserves. Each country already has a pipeline in place, via Morocco and Tunisia respectively, and is building a second direct link.

“Despite rising capital expenditure costs, the LNG picture is one of growth upon growth ... We estimate global demand for LNG will rise 10% a year until 2015,” he says. Predicting trends is risky when energy technology is evolving so quickly, Lyle says.

Clean alternatives such as hydrogen or new sources of natural gas from naturally abundant methane hydrates could quickly take off as soon as they become commercially viable.

The world’s reserves of methane hydrates – methane frozen into a type of ice under the sea bed or in permafrost - exceed those of conventional natural gas by hundreds if not thousands of times.