Unconventional gas: May Turn Around !

Natural gas is becoming less like oil and more like coal, which is a good thing !

The three conventional forms of fossil carbon—oil, coal and gas—differ both in the way the Earth stores them and the way its people use them. Oil is found in relatively few places, and its energy density, pumpability and ease of use in internal-combustion engines makes it particularly well suited as a transportation fuel. Coal is found in many more places—a whole geological era’s worth of rocks, those of the Carboniferous, are named in its honour—and it cannot be pumped around, but can be crushed and burned and so produces baseload power. Gas, typically found and exploited in the same sort of places as oil, is easily moved around through plumbing but is not, usually, seen as a transportation fuel. It has filled niches in between: Europeans warm their homes with it and many developed countries generate some of their electricity with it.

Now new drilling technologies pioneered in America are allowing gas to be extracted from more types of rock—most notably shales, but also so-called “tight” sands and some coal formations—and thus from much more widespread sources. Other innovations, such as producing liquefied natural gas from offshore sources and shipping it to its destinations directly, and technologies that might allow exploitation of the natural gas that is frozen into some permafrosts, further increase the scope for new production. All told, this transition to more plentiful, diverse and widespread reserves in effect makes gas a bit more like coal, and a bit less like oil.

Coal, unlike oil, is hard to embargo: and an obvious consequence of the changes in gas production is that they make gas supply a less potent political tool. In Europe, where Russia has used supply cut-offs to put pressure on.........

neighbouring Ukraine, discoveries of shale gas in eastern Europe could diversify supply in a useful way. But countries can benefit from unconventional reserves without actually having any. More producers and a larger capacity to ship the fuel in its liquefied form—a capacity developed when no one foresaw that America would be supplying its own gas demand, thanks to its shales— will make gas a more fungible commodity. That continuing trend will mean that very few countries will ever be locked into a single source. In this more open market, existing gas producers reliant on conventional reserves that are hard to get at (which includes many Russian reserves) will have their prospects damaged, especially since the gas price will be increasingly decoupled from that of oil.

Burning issues

In the medium term the demand side of the business should change. More diverse and abundant sources, which are making gas more coal-like, should also make it easier for electricity generators to switch from coal to gas. Plants that burn coal produce about twice as much carbon dioxide as generators using gas. Despite the lack of carbon prices in most economies, the uncertainty around future restrictions on carbon already adds to the risks of building new coal plants. Safer-looking gas and riskier-looking coal provide an environment in which the effort required to induce switching from one to the other is lessened; environmental prudence increasingly goes with the grain of the market. The relevant effort need not be limited to carbon pricing. Simply helping China and India realise their indigenous unconventional gas supplies could do a lot to encourage them to switch fuels.

That gas is more like coal these days is not unequivocally good news. Coal mining is a messy business, often wreaking terrible environmental damage nearby. Conventional gas production is relatively easy, but getting gas out of unconventional sources requires some physical and chemical violence to make the rocks more permeable. The history of fossil-fuel extraction suggests that these processes may do harm. The risks need independent study, and both shale-gas producers and environmental regulators need to take them seriously.

Another danger is that unconventional gas will push aside not just a swathe of coal-fired power stations, but promising renewables, too. That would be wrong; emitting less carbon is not a substitute for emitting none. And, happily, gas-fired stations can boost the prospects for renewables, by smoothing out fluctuations in supply from renewable sources. Unconventional gas is a striking example of innovation turning assumptions on their head and opening up new possibilities. As such it should serve to inspire, as well as facilitate, further breakthroughs. But it doesn’t abolish the need for them.

Source: Economist.