Recent IEA report “Are gas prices rising?” published by the International Energy Agency (IEA). It sparked a number of conversations around the world about the future for gas. Numerous energy market experts shared their views and thoughts on the report. I was inspired to write this article.
According to the IEA report, natural gas will experience a golden age if it is discovered in South America and Central Asia. They also expect the supply of unconventional resources, such as shale, and the unexpected increase in demand.
According to the IEA, the world’s consumption will increase by over 50% in the next 25 years. This will account for 25% of the world’s energy supply by 2035. This report also indicates that it could be a quick way to combat global warming, due to its low CO2 emission when it is burned.
This is when people start to disagree. Natural gas is the fossil fuel with the lowest CO2 emissions, however it still emits carbon dioxide when it’s burned. Strong reliance on natural gas could lead to temperatures rising by 3.5oC over 50 years, which could have devastating consequences. This problem could be easily fixed by installing carbon storage and capture equipment on power plants. This would lead to higher energy prices, making gas no longer an attractive option.
However, it’s too early to make any conclusion as further studies are required in this area to evaluate operational costs of carbon-capture and storage equipment.
The shalegas is the largest bet by the IEA for a new natural gas golden era. Canada Natural Gas is not new. It was discovered and extracted first in 1821. But, due to larger natural gas reserves as well as more costly extraction, its production has been overshadowed.
Global reserves are decreasing and shale is becoming an attractive option. This is especially true in America, where the production has tripled in the past five year. An abundance of shale will make up 40% of the US’s energy supply.
Germany has announced that all its nuclear power plant will be shut down by 2022. This is another reason for gas. Germans are planning to mix renewable energy resources and natural gaz to make up for lost nuclear power. Six new natural-gas power plants will be constructed, totaling 5 GW. This will certainly increase global demand.
Although all of the IEA’s reports seem very positive, there are many other factors that need to be taken into consideration before we can claim that gas has entered its golden era.
According to Javier Blas of the Financial Times Commodities Specialists Javier Blas:
Due to increasing global demand, the natural gas market is experiencing a golden era. So declares the International Energy Agency. It is the central watchdog for the west. For now, however, the natural gas pricing system is still very much in the dark ages.