The Huge Future Potential of Natural Gas As US Becomes LNG Leader

natural gas now - Tom Shepstone ReportsTom Shepstone
Shepstone Management Company, Inc.

A new report indicates a bright future for LNG, with the US well on its way to becoming the world leader as natural gas becomes the basic energy source.

Black & Veatch Strategic Directions just came out with a report showing we are clearly entering the golden age for gas as far as the US is concerned. A highlighted version of the report can be found here and is well worth perusing for insights into why this is true. LNG is the future for both the US and the new countries around the world that are finally getting access to this clean, economical energy source.

LNG

The Hilli Episeyo – Floating LNG Ship. Illustration from Black & Veatch Natural Gas Report

The Black and Veatch report is a compilation of some industry surveys and articles assembled with a view toward understanding the future of natural gas. It’s incredibly revealing as it explains the relationship between renewables and natural gas. It also explores the changing technology being brought to the table in the form of floating LNG facilities that both liquefy and regasify. Here are some of the highlights:

  • The federal government predicts that domestic gas production will spike by 22 billion cubic feet per day (Bcf/d) to 103 Bcf/d by 2029.

  • Forty countries now import natural gas, up 11 in just the past five years.

  • The IEA forecasted in its Southeast Asia Energy Outlook 2017 that demand for natural gas will grow by 60 percent by 2040, due to rising consumption in power generation and industry. One estimate holds that by 2035, more than half of the region’s gas demand will be met by LNG.

  • Demand in China, India and other Asian countries that are not members of the Organisation for Economic Co-operation and Development (OECD) account for two-thirds of this growth in energy consumption, drawing strongly upon natural gas.

  • The link between gas and renewables can be stronger than mere siloed parts of a diverse power portfolio. For example, new scenarios are emerging that pair storage with conventional gas turbine generation to deliver more rapid response, milder ramp rates, fewer starts and stops, and emissions reductions.

  • And in regions where renewables are maturing, their increasing penetration still requires an increase in the amount of natural gas-fired backup to accommodate the faster up and down ramping requirements of electric generation caused by distributed energy resources. Additionally, although much of the current discussion is on the use of natural gas for power generation and its interplay with renewables growth, natural gas demand for industrial uses and transportation is also expected to grow significantly.

  • Global natural gas demand grew in 2017 by 3 percent, the highest increase since 2010, the IEA recently reported amid predictions that the global gas trade will rise from one-third in 2017 to nearly 40 percent in 2023, propelled by emerging markets.

  • According to the IEA, the U.S. accounts for nearly 45 percent of growth in global production and nearly three-quarters of LNG export growth.

  • Although U.S. LNG developers face challenges that include regulatory hurdles in getting terminal projects to construction, the IEA expects the U.S. to account for three-quarters of the global growth in natural gas exports over the next half decade.

  • Proposed import facilities include both land-based and floating regasification units in conjunction with new gas pipelines.

  • China, driven by continuous economic growth and strong policy support to curb air pollution, will account for 37 percent of the global rise in natural gas consumption between 2017 and 2023, ultimately becoming the world’s biggest importer of the fossil fuel, the agency said.

  • LNG production and shipping technologies, particularly FLNG, have now been proven and are rapidly gaining momentum for moving supply to demand-heavy markets.

  • With the successful delivery in the books from the world’s first converted FLNG vessel, the Hilli Episeyo, suddenly traditional on-land baseload LNG export production plants aren’t the only viable options. FLNG facilities also are proving to be a lower-risk opportunity for investors because they offer a quicker speed to market, aren’t fixed to one location and have greater operational flexibility with smaller trains.

  • The benefits of not having to wait for local permitting processes to break ground while ensuring consistent high quality in a controlled environment of a shipyard cannot be overstated.

  • LNG is a clean fuel without the intermittency issues that renewables face today, and as energy projects spring up across the globe, developers are entering the market as confidence in the economics of smaller-scale LNG soars. In fact, 64 percent of survey respondents believe more developers are likely to enter the market in the wake of the recent Hilli milestones.

  • The larger land-based LNG facilities are more complex, can’t scale down to match fluctuating offtaker demand and can take upward of four to five years before coming online. FLNG is simply a faster solution for moving supply with a much lower financial risk for investors.

  • The EIA projects that by 2022, the U.S. will become a net energy exporter, according to its newly released Annual Energy Outlook 2018. For natural gas, this shift will happen even earlier, around 2020, the EIA says.

  • Natural gas oversupply and persistent low prices are making gas-to-power conversions increasingly attractive to the rest of the world. Countries thatconvert from oil to gas, particularly those that have traditionally run on diesel fuel oil, can cut their electric costs in half, balance their energy portfolios and comply with environmental regulations. Case in point: One combined cycle project under way in Puerto Rico cost $30 million to convert from oil to natural gas. Based on current oil prices and the current low cost of LNG, the island nation stands to save approximately $20 million per month on power costs — not to mention the environmental benefits of powering a plant off natural gas rather than oil.

  • The New England market, where supply remains heavily constrained on peak winter days, is most in need of incremental pipeline capacity over the next five years, according to Black & Veatch’s 2019 Strategic Directions: Natural Gas Report survey.

  • Ironically, the nearest source of natural gas — the Appalachian Basin, home to the Marcellus and Utica shale plays — is far and away the most abundant in the U.S. According to the EIA, natural gas production in the Appalachian region has grown from 7.9 billion cubic feet per day (Bcf/d) in 2012 to 26.9 Bcf/d in 2018, based on EIA data through August 2018.

  • As a feedstock, natural gas has many advantages. Compared to emissions from coal-fired generation, natural gas produces half as much carbon dioxide, less than a third as much nitrogen oxides and 1 percent as much sulfur oxides, according to the U.S. Environmental Protection Agency. In areas where air quality needs improvement, gas is a viable alternative.

  • Compared to coal and renewable energy, natural gas offers power providers the shortest startup time. The ability of gas-fired power stations to ramp-up more quickly than those using other feedstocks means they can be considered a viable baseload option for communities using power from renewable sources.

  • FSRUs are less of an investment risk than onshore LNG terminals. If FSRUs are retrofitted from LNG vessels, the investment is even lower. The FSRU’s portability offers greater investment protection while addressing the lack of pipelines and terminal infrastructure. It also removes land acquisition issues.

  • FLNG applications are more flexible and can be deployed more quickly than onshore LNG import terminals. FLNG and FSRU projects effectively reduce issues of shoreline impacts, size and complexity considerations in development.

It’s a fascinating report that illustrates how far ahead of natural gas opposition that natural gas technology is — yet again. The ability to do floating liquefication and regasification alone mean years saved in the sort of permitting delays experienced at Cove Point. It also means the ability to supply Boston with gas if hoity-toity New Englanders imagine they’re too good for pipelines. Talk about end runs! Natural gas is not only here to stay but has an exceedingly bright future.

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2 thoughts on “The Huge Future Potential of Natural Gas As US Becomes LNG Leader

  1. As fantastic as much of this post is, it barely scratches the surface of what you folks can expect as natgas development continues.

    The Driftwood LNG plant will use smaller (1.38 mtpa) trains that are WAY faster and cheaper to install as much of the hardware is pre-fabbed modular units shipped and assembled onsite.
    At under $16 billion cost, this 27 mtpa plant will produce as much as Yamal at half the cost.

    Ditto when compared to the 3 Curtis Island projects in Australia which produce less at 4 times the cost.

    Cheaper still on the horizon is the Delfin project which will employ 4 floaters as described in the above article to produce 13 mtpa at lower unit cost yet.

    In the not too distant future, the time will arrive when natgas is the primary transportation fuel.
    MOFs may lead the way as cutting edge models now have gram sized units with internal surface area equal to 2 football fields (10,000 sq. yards).

    The Iranians have claimed to have achieved the ‘Holy Grail’ in this adsorbed gas field with sub 500 psi tanks comparable to 16 gallon gasoline tank range.
    At sub 500 psi, homeowners can fuel their vehicles right at their residences with supplied gas.

    Currently, there are almost 30 million natgas fuelled vehicles on the road in the world, according to NGV Global. This is about 7 times the number of electric vehicles.

    Retail price of CNG in several Oklahoma CNG stations today is about $1.40 for a Gallon of Gasoline Equivalent (GGE).
    That means it would cost under $45 to completely fill a 32 gallon, F 150 tank from empty.

    Appalachia Rising!

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