Natural Gas: A Serious Alternative to Coal

The natural gas market should grow by an average of 1.7% a year for the next 20 years (© OECD/IEA, WEO 2012), three times faster than oil but less than the 2.5% growth in the last 10 years. As with oil, several scenarios were developed by the International Energy Agency; the intermediate one is selected for discussion here. Exxon Mobil (2016) presents a similar scenario with around 1.7% growth for the coming decades. Shell (2016) considers the growth of natural gas to be higher, between 1.9% (“Oceans” scenario) and 2.5% growth per year (“Mountains” scenario). Statoil (2016) considers the growth to be lower, between 0 and 1.1% per year depending on the scenarios. As natural gas is a credible alternative to coal for electricity production, production is expected to grow everywhere, with the exception of Europe. North America shall continue to remain independent. Russia is planned to grow at 1.5%, twice the growth of its consumption. The country is likely to compensate for the drop of exports to Europe by exporting to China. To facilitate such exports, investments need to be made in both production capacity and transportation infrastructure. Bilateral agreements with China could help ramp up operations in Siberia and in the Far East, to the benefit of China. Another large producer is the Middle East, where production is expected to grow by more than 2% per year on average. Output growth in Africa is estimated at 3% per year. These regions will supply both Europe and Asia. The growth of production in Asia (5% per year in China, 3% per year in India, 2% per year in the rest of Asia) would not be enough to compensate for the growth in consumption in these countries. Consumption is expected to expand at more than 7% per year in China and more than 5% per year in India (Figs. 3.30 and 3.31).

Evolution of natural gas production (© OECD/IEA, WEO 2012)

Fig. 3.30 Evolution of natural gas production (© OECD/IEA, WEO 2012)

Evolution of natural gas consumption (© OECD/IEA, WEO 2012)

Fig. 3.31 Evolution of natural gas consumption (© OECD/IEA, WEO 2012)

The expansion of the natural gas industry will be driven by electricity production, with growth for that application estimated at above 1.8% per year on average over the next 20 years. District heating should not grow by more than 0.9% per year on average. Most of this growth will come from China, which will invest in the sector. The market in Europe and North America is fairly stable and saturated. Industrial applications should also grow fast, around 2.9% per year on average, even though the base is low (16% of total). In those applications, natural gas will progressively be used as an alternative to coal for heating processes as well as a raw material for some energy processes (e.g., in refineries) (Fig. 3.32).

Evolution of natural gas consumption per sector (© OECD/IEA, WEO 2012)

Fig.3 .32 Evolution of natural gas consumption per sector (© OECD/IEA, WEO 2012)

 
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