By Malini Hariharan
Is the International Energy Agency (IEA) being extremely bullish in predicting a 'golden age' for natural gas over the next 25 years?
In a recently released report (available here) the IEA forecasts a 55% growth in global demand to 5.1 trillion cubic metre (tcm) in 2035 driven mainly by China, India and also the Middle East. The share of natural gas in the global energy mix is expected to rise to 25%, from the current 21%, during the same period pushing coal's share down to 22%.
Where will the gas come from? Eastern Europe led by Russia is expected to remain the largest supplier followed by the Middle East and North America.
The agency is confident that production in the Middle East, despite political issues in Iran and Iraq, and a gas moratorium in Qatar, will more than double by 2035. But it admits that "an important factor influencing new gas development in the region will be whether domestic gas prices are permitted to rise to a level that stimulates investment".
This is crucial as new reserves, which are not associated with crude oil, are likely to be more expensive to develop.
Interestingly, the IEA also expects China to tap unconventional sources of gas such as coal bed methane (CBM) and shale gas to emerge as a major producer pumping out nearly 300 billion cubic metres (bcm) in 2035, up from 80bcm in 2008.
But the country will still remain a large importer as local production is likely to meet only half of domestic demand which is expected to match that of the entire European Union in 2035.
There are probably not too many questions on the projected demand growth for especially for power generation after Japan's nuclear crisis. The power sector is expected to remain the largest consumer accounting for 24% of total gas demand in 2035.
But perhaps the IEA's predictions on the rise of unconventional sources of gas, which it describes as "key to expanding the long-term role of as in global enery mix" are a little premature. The agency expects the share of unconventional sources to rise to 24% in 2035 from 12% in 2008.
"We project the share of shale gas in global gas production reaches 11% in 2035 while that of CBM reaches 7% and tight gas 6%. Unconventional gas production is currently concentrated in the US and Canada. By the end of the Outlook period, unconventional gas also reaches a significant scale in China (CBM and shale), Russia (tight gas), India (shale) and Australia (CBM)," says the IEA.
The agency is also confident that gas from unconventional sources can be produced at costs similar to those in North America ($3-7/mmbtu). This is debatable as costs are likely to be higher in some location which will have major implications on projected production volumes.
Also the shale gas revolution has yet to take root outside the US. China has only recently opened its doors while in India exploration has yet to start.
The IEA acknowledges the environmental issues surrounding the fracking technique used to get to shale gas but expects these to be resolved once regulatory frameworks are set up.
However, as reported by the blog earlier, the concerns are getting louder and some European countries like France have already taken action to place restricting shale gas drilling.
The world, including the petrochemicals industry, certainly needs more unconventional gas but gaining public acceptance is unlikely to be easy.