Yet Another “Golden Year for Gas” Says International Energy Agency

cost of renewables - Tom ShepstoneTom Shepstone
Natural Gas NOW

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The head of the International Energy Agency has just declared 2018 was another “golden year of gas” worldwide with gas representing almost half of demand.

Yes, Dr. Fatih Birol, Executive Director of the International Energy Agency, just said this:

“Last year can also be considered another golden year for gas, which accounted for almost half the growth in global energy demand.”

It’s a remarkable statement and testament to what the shale revolution has done for energy and the environment.

international energy agency

The International Energy Agency was formed after the 1973-1974 Middle East War crisis and its immediate aftermath to respond to the fact oil producing nations were much better organized than oil consuming countries. The IEA was created to address energy security and other questions of energy policy in cooperation with other nations who signed an “Agreement on an International Energy Program.” It is a font of statistics on energy and monitors worldwide trends.

The International Energy Agency’s latest Global Energy & CO2 Status Report provides a “high-level and up-to-date view of energy markets, including latest available data for oil, natural gas, coal, wind, solar, nuclear power, electricity, and energy efficiency.” Here’s some of what the report says about natural gas and it’s latest golden years (emphasis added):

Natural gas consumption worldwide grew by an estimated 4.6% in 2018, or 170 bcm, its strongest increase since 2010 when gas demand was rebounding from the 2008 global financial crisis. This second consecutive year of strong growth (after a 3% gain in 2017) was nearly three times the average growth of 1.5% over the previous five years.

The United States and China together accounted for 70% of the global growth, which was driven by a strong global economy and by substitution from coal. The switch from coal to gas was responsible for nearly 40 bcm of the increase in gas, more than one-fifth of the total extra demand.

The United States was the single largest driver of higher demand, with a gain of 80 bcm, up 10.5% from the previous year – its highest increase since the early 1950s. This higher consumption, the equivalent of the United Kingdom’s annual consumption, absorbed the majority of the growth in domestic gas production, which also hit record levels in 2018.

Such historic demand growth was mainly driven by power generation and buildings. A colder winter and hotter summer than average was responsible for around half of the extra gas demand in both sectors. The ongoing switch from coal to gas in power generation also contributed strongly to the growth, adding 18 bcm to gas demand. The share of gas in power generation hit an all-time record of 34%.

Gas demand in China increased by almost 18%, or 42 bcm, the fastest growth rate since the introduction of its 13th Five-Year Plan (2016-2020) and its more ambitious promotion of the use of natural gas relative to previous Plans. Gas now accounts for 8% of primary demand in China, double its share at the start of the decade.

The country became the world’s largest natural gas importer in 2018, ahead of Japan, and was the second-largest contributor in volume to global demand growth after the United States. This results from the country’s policy framework in favour of cleaner energies (known as the “Three- Year Action Plan for Winning the Blue Sky War”) and, in particular, by restricting the use of coal boilers for industrial and residential use. Across all sectors, the switch from coal to gas contributed 17 bcm to demand growth.

In the Asia-Pacific region, natural gas demand was also pushed by growing industry and power generation needs in South Asia as well as by nuclear reactor shutdowns in South Korea.

It was, indeed, a golden year for gas. The growth in demand in China suggests strong LNG export potential for us for years to come, not mention numerous other worldwide opportunities.

There’s also something else from the emissions part of the report:

In the United States, the emission reductions seen in 2017 were reversed, with an increase of 3.1% in CO2 emissions in 2018. Despite this increase, emissions in the United States remain around their 1990 levels, 14% and 800 Mt of CO2 below their peak in 2000. This is the largest absolute decline among all countries since 2000.

Yes, the shale revolution has accomplished more to reduce emissions than anything else anywhere else. Emissions went up in 2018 due to the weather and an economic rebound but we’re still leading the way. And, there’s a lot more progress to come with carbon capture:

For the first time in almost a decade, 2018 saw an increase in plans to develop large-scale carbon capture, utilisation and storage (CCUS) facilities. By the end of 2018, the number of projects operating, under construction, or under serious consideration increased to 43. China is operating a new facility to capture CO2 from natural gas processing for use in enhanced oil recovery, and, in Europe, five new projects are under development.

The new facilities have the potential to capture up to 13 Mt CO2 annually, a 15% increase in potential CO2 capture across the global project pipeline. The expansion of tax credits for CO2 use and storage in the United States is also expected to support a new wave of investment in CCUS in the coming years.

I’m not in favor of subsidizing anything, but, if we’re going to subsidize carbon capture, utilization and storage makes a lot more sense than renewables, which are inherently uneconomic because they have to be backed up by nuclear or natural anyway.

All in all, gas is the big winner. It is satisfying more energy demand than ever and for good reason.

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