Lloyd’s List: Natural Gas to Step in to Fill Nuclear Breach

“By Michael D. Tusiani : Governments continue to question their future nuclear commitments following the disaster in Japan. THE nuclear crisis in Japan is causing governments to rigorously check the safety of their nuclear plants and to review current and future plans. The conclusion of these reviews will undoubtedly lead to an overall slowdown in nuclear energy growth. Together with the current unrest in oil and gas producing countries, this should make us thankful for the unique strength provided by the world’s natural gas resources. The US is among the best countries positioned to benefit from natural gas — a clean fuel which can be burned in power plants that could be constructed in as little as 18 months. Price volatility for US natural gas that has run rampant in past years has been tamed. Even as oil and other commodities spike in price, US natural gas continues to trade at about $4/MMBtu, defying global commodity pressures. That is about one-quarter of the price of oil on an energy equivalent basis and less than half of the sales price of most internationally-traded gas. Even if the price of US natural gas increases modestly, it will still be competitively priced for consumers. In addition, horizontal drilling and hydraulic fracturing, commonly called fracking, is providing tremendous economic stimuli in the states where gas is located. There are some valid concerns relating to potential damage to the water supply from fracking. However, despite environmentalists’ fears, with rigorous oversight, natural gas can be developed safely. According to the Department of Energy, the US’ proven net recoverable natural gas reserves rose 11% in 2009 to 284 trn cu ft largely due to drilling’s technological breakthroughs. Most experts believe these resources can satisfy over 100 years of US demand at current levels. Furthermore, American industry is the recognised world leader in gas extraction technology which is commercialising the nation’s vast shale gas resource. This technology is already being transferred overseas, enhancing gas reserves in other continents. Investments are being made in developing shale gas resources in many countries. A recent study also released by the US Department of Energy found that the world’s total technically-recoverable shale gas reserves are 6,622 TCF including 864 TCF in the US. This finding is 40% higher than previous estimates and illustrates the potential of shale gas globally. While there is no data currently available to assess whether shale gas developments in the rest of the world will be as plentiful as those in the US, the technology and expertise developed in the US will undoubtedly prove beneficial to furthering worldwide production of shale gas resources. Also, to further strengthen the US supply position, there are also ample liquefied natural gas receiving terminals to assure the availability of imported gas to American households, power plants and industry. Investments are being contemplated at several of these facilities to enable exports as well. This is encouraging for the development of the US’ abundant gas reserves, assuming policymakers do not prohibit US exports for fear of creating higher prices for the American consumer. At $4/MMBtu, gas prices are very competitive with oil and comparable to coal when used to generate power. Gas is certainly cleaner than coal and more reliable than renewables such as wind and solar. Investments have also been made in facilities around the world to import LNG, increasing the availability of natural gas for consumers. There are 94 LNG import facilities currently in operation in 23 countries, another 21 facilities under construction and an additional three countries now capable of importing LNG. Eleven of the countries currently importing LNG have significant shale gas resource potential. LNG imports, combined with growth in domestic natural gas reserves and production, will create competition, stabilise prices and increase the availability of this clean-burning fuel source. Nuclear power is still necessary to provide energy to the world’s masses, but the ‘renaissance’ that many thought was under way may no longer be possible. The time has come for politicians to recognize that all forms of energy are required to satisfy the world’s growing demand and to embrace a new strategy which will protect the environment, while allowing nations to benefit from the world’s abundant and affordable natural gas resource. Michael D Tusiani is chairman and chief executive of Poten & Partners and a senior fellow at Columbia University’s Center for Energy, Marine Transportation and Public Policy. He is co-author of LNG: A Nontechnical Guide (PennWell, 2007).”