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By Robert Rapier on Jul 24, 2014 with 7 responses

The US and Russia are Gas Giants

Introduction

This is the 2nd installment in a series that examines data from the recently released Statistical Review of World Energy 2014. The previous post – World Sets New Oil Production and Consumption Records – delved into world oil production and consumption figures. Today’s post looks at the global natural gas picture.

In 2013 global natural gas production advanced 1.1% to a new all-time high of 328 billion cubic feet per day (Bcfd). Except for a one-year decline in 2008-2009, global gas production has risen fairly steadily for about three decades, and production has more than doubled during that time span:

Global Gas Production 1970 through 2013

The US is Still Gas King

The US continues to dominate both natural gas production (and consumption). In 2013, the US set a new all-time high production record for the third straight year, with gas production rising to 66.5 Bcfd to lead all countries. In fact this was once again more natural gas than any country has ever produced in one year.

 

US Gas Production 1970 through 2013

Natural gas production in Russia reached 58.5 Bcfd, good for 2nd place globally. The US and Russia cumulatively produce 38% of the world’s natural gas. Far behind in third place was Iran at 16.1 Bcfd — good for 4.9% of global gas supplies. Rounding out the top five were Qatar at 15.3 Bcfd and Canada at 15 Bcfd.

However, US natural gas consumption was still greater than consumption, rising to 71.3 Bcfd as utilities continued to look to natural gas as a cleaner alternative to coal. Despite an increase in the past 8 years of 17 Bcfd — an increase of nearly 35% — the US remains a net importer (and the largest consumer) of natural gas.

Russia and Iran were second and third in natural gas consumption. They consumed, respectively, 40 Bcfd, and 15.7 Bcfd. The US and Iran consumed at least as much gas as they produced, while Russia produced nearly 50% more than it consumed internally. The rest of Russia’s gas is piped primarily to Europe, but China recently signed a $400 billion deal with Gazprom that will supply China with Russian gas for the next 30 years. In 2013 China was the world’s fourth-largest consumer of natural gas at 15.6 Bcfd. Rounding out the top five among consumers was Japan at 11.3 Bcfd.

Natural Gas Reserves

Despite the surge in US natural gas production, US proved reserves have increased substantially over the years. Proved gas reserves in the US reached an all-time high of 334 Tcf in 2011, fell in 2012, but surged in 2013 back to 330 Tcf. The increase in reserves is primarily a function of the pairing of hydraulic fracturing with horizontal drilling, which turned a big volume of natural gas resources into natural gas reserves for the first time (i.e., the “shale gas boom”). After two decades of declining to flat natural gas reserves, US reserves have now risen 86% since 2000.

Global proved natural gas reserves have grown more consistently than US reserves over the years, albeit not as sharply. Over the past decade global gas reserves are up 33%, and just eked out a new record in 2013 of 6,558 Tcf. While this record is a fraction of a percent higher than the previous record in 2011, global reserves have been effectively flat for the last two years.

Price and Differentials

The surge in US gas production has had a dampening impact on domestic gas prices, but internationally prices have risen substantially over the past decade:

Global Gas Prices 1990-2013

This combination has resulted in enormous differentials that have developed between US natural gas prices and liquefied natural gas (LNG) prices in Europe and northeast Asia. These high differentials have resulted in a rush to build LNG export terminals in the US.

US natural gas production is up 11.4 Bcfd in just the past five years. However, there are presently 13 pending proposals awaiting approval from the Federal Energy Regulatory Commission (FERC), with a total proposed export capacity of 17.9 Bcfd. Two projects have already been approved by FERC. Cheniere Energy (NYSE: LNG) and Sempra Energy (NYSE: SRE) have had projects approved with a combined proposed capacity of 4.46 Bcfd.

Conclusions

The global natural gas picture is dominated by the US and Russia, and this will likely continue to be the case for the foreseeable future. But the US is in 5th place globally in natural gas reserves, far behind countries like Iran and Russia. Ultimately the US will probably yield its position as the top gas producer back to Russia.

Nevertheless, the shale gas boom in the US has expanded natural gas production rapidly, which has led to a number of LNG export terminal proposals. But unless US natural gas production continues expanding at the pace of the past five years, it is almost a certainty that these export facilities (among other drivers) will lead to higher US natural gas prices.

Link to Original Article: The US and Russia are Gas Giants

By Robert Rapier. You can find me on TwitterLinkedIn, or Facebook.

  1. By Forrest on July 24, 2014 at 7:53 am

    Exporting NG via pipeline, such as is done per the geography of Europe and Russian operations, is more attractive than expensive LNG operations. But, that choice is not available to all countries. U.S. would get more value from it’s domestic NG production upon consuming the energy source internally, since the transportation costs would be low. But, per the wisdom of financial markets and Constitutional free market principles we all benefit more from companies (our citizens) selling wares wherein they can get the best price. Countries such as Japan pay a premium for LNG.

    I fear Sierra Club fortunes applied to scarring and misinforming public will result in our decreasing economic power to improve our force of good per international tensions and criminal actions. We may wake up and find ourselves like Germany with Green energy empty promises, big utility bills, less business activity, increasing unemployment, and decreasing energy production that will leave us easy exploited by foreign forces. One such bad decision already in the mix. We have tremendous supply of coal. Coal can only be utilized per the environmentally responsible way of the modern gasification power plants. This is the one sweet spot to utilize coal upon combined cycle efficient power plants. Why burn NG for this? NG fuel is more valuable and versatile to economy than coal. For example, NG can power our CHIP power generators located at point of use. Also, NG peaking power plants a good service, but base load power plants should be coal, hydo, and nuclear even though NG is more efficient and less costly to install. This plan of action would stabilize our economy to long term low cost energy. Also, natural gas is so versatile it is gaining acceptance as low cost motor fuel. Surely, this would be good for economy to utilize NG upon the demanding requirements and high cost of motor fuel and utilize low cost coal, hydro, and nuclear for power generation.

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    • By Jacob David Tannenbaum on July 24, 2014 at 10:02 pm

      You’re stuck in the past Forrest. No-one is going to retrofit America’s coal fleet to become gasifiers – the economics don’t work, and the carbon emissions certainly don’t work.

      The best US coal reserves have been tapped out, and the remaining coal is of worse quality, and sometimes has higher sulphur content (Midwestern), which means that it’s not going to pass environmental muster. Distributed, rooftop solar is becoming cheaper and cheaper for American households, and when the storage part of the equation becomes cost effective, the ‘baseload’ argument for coal evaporates. Nobody is going to build a gasifier as a ‘peaker’ plant when every home has a smart inverter that buys up energy when it’s at its cheapest.

      If you want the best and highest use of the natural gas, use it domestically for industry. Why export it to Japan when you can value-add in the USA? Look at what’s already happening in fertilizers, they’ve come back from MENA to use the gas. Foreign countries pay so much for the energy because they need it desperately. Americans are already paid less than Germans, what are they doing with it that the US couldn’t do cheaper?

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      • By Forrest on July 25, 2014 at 7:59 am

        The coal gasification process is exceptional in removing all emissions including sulfur and per the high efficiencies of combined cycle, coal CO2 is in line with natural gas. The plants are expensive, but they haven’t built many of them and as Robert’s info points out the developing countries will burn coal and per their low tech coal plant pollution and in doing so will dwarf anything the U.S. does to conserve CO2 emission. The U.S. could do more for global pollution if we focus on minimizing this huge pollution stream. Sure, build better solar panels, but that already is in the mix. Meaning the coal pollution will continue, regardless. If we subsidized clean coal technology and invented lower cost CGCC (coal gasification combine cycle) power plants we could do a tremendous good. The process is mature technology.
        I do like solar and also appreciate the contribution roof top solar should produce. Same with miro-grids and CHIP natural gas power plants. I think it’s a shame that hydro is expected not to increase per fed policy. Meaning we could double our hydro power per energy department review and have minimum environmental impact per computer software determination, but policy of fed basically do not wish to do so. It’s just prejudice and desire to chose winners in spite of environmental improvement. This is yet another indicator the environment is just a tool to accomplish desires.
        MENA composting is aerobic process and as we know compost piles and rotting cellulose a colossal CO2 emission stream. Anerobic digestors are solving that problem and supplying natural gas. Ethanol plants have and expected to continue to exploit the process to bump up to California low carbon fuel standards. The waste product of the process a wonderful soil amendment and fertilizer utilized for organic farming, but other farms discovered mixing with chemical fertilizer works well and cheaper. It is expected municipal waste will continue the trend, as well.
        We all benefit if our natural gas sales go to the highest bidder. However, we will continue to enjoy lower cost as compared to international sales as the transportation costs are lower per pipeline transportation. Also, we should utilize the resource per high value needs. Meaning burning the stuff to offset coal base load power is bad utilization, especially long term. Transportation a good use, same with peaking power plants, home use to offset more polluting electricity, fuel CHP power generation, and to power industry all good applications.
        The solutions to our energy problems will take take many turns and no one is capable to predetermine the best path, most of all federal employees. However they can do much harm per optimal outcomes with potential damage of regulation. For example the ethanol industry may eventually supply all of light vehicle fuel needs. Many improving factors support a trend line to make it possible. CO2 concerns may fade quickly per hydrogen fuel cell ability to power all of transportation and all power needs. Interesting example: there is an international community of scientist including Purdue University that is busy researching the spinach plant per the 60% solar efficiency ability to process proteins per photosynthesis process to produce cellulose. This has potential for GMO with such results as improved corn plant or cellulose feed stock for ethanol. Also, the ability for synthetic or artificial photosynthesis to consume CO2 and generate hydrogen fuel within carbohydrates and oxygen.

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      • By Forrest on July 29, 2014 at 7:49 am

        The official acronym for coal gasification power generation combined cycle is IGCC. The hot air turbine efficiency continues to advance. Old coal combustion power plants powering the steam turbine about mid 30′s percent efficiency. Hot air turbines have advanced to 2500 deg F temperatures that push efficiencies to 60%. Temperatures so high that waste heat can power the traditional steam turbine for very high combined efficiencies. Waste heat from the steam turbine cycle can power hot process needs of space, water, and distillation heating needs of industry and municipalities, as well. Also, the coal gasification process stream is loaded with hydrogen and appears capable of powering future needs of hydrogen economy including combined cycle power generation plants of fuel cell and steam turbine pushing the combined cycle to ultra high efficiencies. Other by products or processes currently produce ammonia (fertilizer) and plastic feed stock. Current operating power plants are expensive, but have much power production and very low emissions. Energy department is supporting new generation of pollution control technology that is remarkable. Mixing bio-mass within the fuel and limiting nitrogen combustion gas another positive variable.
        Environmentalist that unwittingly demagogue coal are hurting their promoted cause. If in fact environmentalist are merely in search of environmentally friendly solutions they could gain much upon international pollution by promoting clean coal solutions and condemning old combustion coal plants as wasteful use of precious fuel. Environmentalist should be promoting standardizing, compacting, and thereupon greatly improving the cost and portability of this power plant technology for emerging world market use. We need to address power needs of developing countries and attempt to provide for them solutions that greatly reduce environmental harm. Forget the bunk often regurgitated of impressing other countries to follow are lead (use wind and solar) as they have no high respect of our political genius elites.

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        • By Jacob David Tannenbaum on July 31, 2014 at 3:01 am

          You seem like a very scientifically minded person, how is it that you still believe that there’s an acceptable rate of carbon emissions? The physics of the world doesn’t care whether or not we’ve managed to increase everyone’s standard of living by the time we start to address climate change – it will happen when it happens.

          It’s great that IGCC plants are twice as efficient as our legacy plants, but it’s too little too late. I know that they can be built, and I know that in certain places they will be built, but at the end of the day IGCC systems are still taking ancient atmospheric carbon that was inert and safely sequestered and introducing it into our modern day atmosphere.

          For some reason it’s acceptable to overlook this today, but in the period when you are suggesting that these plants will enjoy their usable lives, it will not be acceptable. Developing countries may attempt and implement these systems, but in just five years time when proper energy storage starts to become cost-effective, they will be drowned by cheap renewables that skim the cream off the top. Baseload generation as a business model is doomed.

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  2. By Mac on August 7, 2014 at 9:15 pm

    We can maintain present oil prices simply by drawing down on known reserves. Sure… Then peak oil is a myth, right ???

    Uhhh….wait a minute… someone said that current oil discovery rate is about two barrels consumed for every one barrels consumed..

    Even beyond this, the famed environmentalist Monbiot claims that:

    “The world’s problem is as follows. We now consume six barrels of oil for
    every new barrel we discover. Major oil finds (of over 500m barrels)
    peaked in 1964. In 2000, there were 13 such discoveries, in 2001 six, in
    2002 two and in 2003 none. Three major new projects will come on stream
    in 2007 and three in 2008. For the following years, none have yet been
    scheduled.”

    I do not like Monbiot’s analysis and I think he is way off, but numerous others have also stated that we are only discovering oil at a rate of about 1 barrel for every 2 barrels consumed.

    I believe that most of the shale gas finds are predominately natural gas and not true oil finds.

    The discovery versus consumption figure is the crucial metric, Not, whether the Saudis will allow a few more barrels this month, or whether Iraq will come on-line or just what the Nigerians or the Russians will do.

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    • By Mac on August 7, 2014 at 9:43 pm

      The world’s problem is as follows. We now consume six barrels of oil for
      every new barrel we discover. Major oil finds (of over 500m barrels)
      peaked in 1964. In 2000, there were 13 such discoveries, in 2001 six, in
      2002 two and in 2003 none. Three major new projects will come onstream
      in 2007 and three in 2008. For the following years, none have yet been
      scheduled.

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