Implications of Abundant

Natural Gas

JAE EDMONDS AND HAEWON MCJEON APRIL 2013

May 29, 2013 1

May 29, 2013 2

Background

The natural gas revolution

3

The application of technologies for accessing “unconventional” gas shales in the United

States has dramatically increased gas production, and estimates of recoverable

resources even more.

And, dramatically reduced natural gas prices.

Source: EIA, Annual Energy Outlook 2012

Gas and the Global Energy System

May 29, 2013 4

Gas is has been a growing component of the global energy system for some time.

Grubler et al., 2012: Chapter 1 - Energy Primer. In Global Energy Assessment - Toward a Sustainable Future.

A brief history of thinking about Natural

Gas Resources

May 29, 2013 5

In the 1990s total gas reserves were thought to be more abundant than oil, but gas

production was expected to peak and decline before mid-21st century, because gas

exploitable resources were economically limited to “conventional” resources.

Unconventional resources were thought to be too expensive ever to be relevant.

In 1997, Rogner’s work on natural resources indicated that “unconventional gas” was

abundant. But, modelers either were slow to incorporate unconventional gas (and oil)

into their thinking or priced them as more expensive than “conventional” resources.

And then a technological

revolution happened.

Key Questions

As application of new production technology spreads beyond the United

States:

How will this change our understanding of the scale and composition

of the evolving global energy system?

How will this affect energy security and international trade?

How will this affect local and regional air quality?

What effect will this have on CO2 and other GHG emissions and the

technologies for their use in the near term and long term?

Globally and regionally

With and without emissions mitigation policies

Implications for regional air pollution

May 29, 2013 6

May 29, 2013 7

How Much Gas Is Out There?

How much natural gas is there and how much does it cost?

How much in the larger sense means resource availability

Oil, Gas and Coal

Conventional and unconventional for oil and gas

Coal is just too abundant to divide up that way.

-

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000

500,000

oil gas coal

EJ

unconventionalresource

unconventionalreserve

conventionalresource

conventionalreserve

Fossil Fuel Resources

8

How much natural gas is there and how much does it cost?

How much in the larger sense means resource availability

Oil, Gas and Coal

Conventional and unconventional for oil and gas

Coal is just too abundant to divide up that way.

-

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

100,000

oil gas coal

EJ

unconventionalresource

unconventionalreserve

conventionalresource

conventionalreserve

Fossil Fuel Resources

9

How much does it cost?

To help us understand the implications of abundant and inexpensive

natural gas availability for the global energy system, we have

developed three alternative global and regional resource supply

schedules.

Gas Technology Circa 1990 (Gas Tech 1990 or GT1990) this supply

schedule reflects an understanding of gas resource availability circa

1990s.

Gas Technology Circa 2000 (Gas Tech 2000 or GT2000) this supply

schedule reflects an understanding of gas resource availability in the

early 2000s.

Gas Technology Circa 2000 (Gas Tech 2010 or GT2010) this supply

schedule assumes that advanced technologies can be successfully

deployed globally.

May 29, 2013 10

0

5

10

15

20

0 10000 20000 30000 40000

20

05

Ext

ract

ion

Co

st (

20

05

$/G

J)

Cumulative Resource (EJ)

GT1990 GT2000 GT2010

The three gas supply schedules (global)

GT1990 - Conventional Gas Resources Only, ca 1990s

GT2000 - Expensive Unconventional Gas, ca 2000s

GT2010 - Abundant and Inexpensive Gas Resources, 2010 and beyond

May 29, 2013 11

The Global Change Assessment Model

GCAM is a global integrated assessment model

GCAM links Economic, Energy, Land-use, and Climate systems

Technology-rich model

Emissions of 16 greenhouse gases and short-lived species: CO2, CH4, N2O, halocarbons, carbonaceous aerosols, reactive gases, sulfur dioxide.

Runs through 2095 in 5-year time-steps.

Dynamic Recursive

Open Source/Model and Documentation available at: http://www.globalchange.umd.edu/models/gcam/

14 Region Energy/Economy Model

151 Agriculture and Land Use Model

May 29, 2013 12

May 29, 2013 13

Gas and the Global Energy

System

May 29, 2013

0

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85

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95

Glo

bal

Nat

ura

l Gas

Pro

du

ctio

n (

EJ) GT2000

GT1990

Adding Abundant but EXPENSIVE

unconventional gas to Conventional gas

14

Increased late 21st century production

When gas prices were driven up past present prices

Near-term gas production and use were similar in GT1990 and GT2000.

We will focus on the period to 2050

0

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Glo

bal

Nat

ura

l Gas

Pro

du

ctio

n (

EJ) GT2010

GT2000

Abundant AND Inexpensive gas changes

our understanding of the near term

15

Abundant and inexpensive gas is introduced in North America in 2015

and globally in 2020.

The increase in natural gas production accelerates.

And lowers the price of natural gas around the world.

U.S. N. Gas Price N. Gas Production

Abundant AND Inexpensive gas changes

our understanding of the near term

16

Abundant and inexpensive gas is introduced in North America in 2015

and globally in 2020.

The increase in natural gas production accelerates.

And lowers the price of natural gas around the world.

U.S. N. Gas Price Global LNG Price

168 210 198 99

224 307 121

354 313

0

400

800

1200

2005 2050 GT2000

2050 GT2010

EJ/y

r

trad biomass

geothermal

solar

wind

hydro

nuclear

biomass

coal

natural gas

2050 Global Primary Energy Consumption

May 29, 2013 17

493

1,005 1,007

-50

-25

0

25

50

2015 2020 2025 2030 2035 2040 2045 2050

EJ/y

r

net changebatteryCHPsolarwindhydrogeothermalnuclearbiomassliquid fuelgascoal

Abundant and Inexpensive Gas Penetrates

Power Production

Abundant and inexpensive natural gas displaces other energy carriers

in power generation

Where it helps lower generation costs

18

Change in Fuel Mix for Power Generation resulting with Abundant and inexpensive natural gas rather than expensive unconventional gas

Global power sector consumption in 2005 = 185 EJ/yr

Global consumption in 2005 (EJ)

-40

-20

0

20

40

building industry transport electricity

113 152 88 185

EJ/y

rothers

renewables

nuclear

district heat

trad biomass

hydrogen

electricity

biomass

coal

gas

liquid fuel

2050 Global Final Energy Consumption Change

May 29, 2013 19

May 29, 2013 20

Gas and CO2 Emissions—

Without Climate Policy

Carbon and Energy

How does abundant gas affect expected greenhouse gas emissions?

CO2, and total climate forcing.

Carbon and energy

Petroleum = ~20 kgC/GJ

Coal = ~27 kgC/GJ

Natural gas = ~14 kgC/GJ

Nuclear, Solar, wind, geothermal, and other renewable energy forms

= ~0 kgC/GJ

Bioenergy is 0 net emissions for the energy sector, but indirect land use

change emissions are accounted.

May 29, 2013 21

Carbon-energy ratios in the larger economy

Average carbon intensities (kgC/GJ):

Natural gas ~14 Petroleum ~20

Coal ~27

Average global 2030 ~17

Regional average carbon-energy ratios in 2010 (kgC/GJ):

Average US ~16

Average China ~22 (modern ~24)

Average India ~16 (modern ~20)

Average W. Europe ~15

Average Africa ~11 (modern ~15)

May 29, 2013 22

0

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GtC

GT2000

CO2 Emissions: Abundant and Inexpensive

versus Expensive Unconventional Gas

May 29, 2013 23

0

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GtC

GT2000

GT2010

CO2 Emissions: Abundant and Inexpensive

versus Expensive Unconventional Gas

• Virtually no change in Fossil Fuel CO2 emissions.

• Slightly higher in the early years due to increased energy consumption.

• Slightly lower in the later years due to crowding out coal.

May 29, 2013 24

Why did CO2 emissions not decline?

On average natural gas’ Carbon-Energy ratio is

only slightly lower than the average for the world.

Increasing gas backs out both coal and other

competitors, so on average the decline in the Carbon-

Energy ratio is small.

There is a small increase in aggregate energy

use, so there is a small take-back effect from the

increase in system scale.

May 29, 2013 25

May 29, 2013 26

Gas and Greenhouse

Emissions—Without Climate

Policy

Gas and Non-CO2 GHG Emissions

How does abundant gas affect expected greenhouse gas emissions?

CO2, and total climate forcing.

Carbon and energy

Petroleum = ~20 kgC/GJ

Coal = ~27 kgC/GJ

Natural gas = ~14 kgC/GJ

Nuclear, Solar, wind, geothermal, and other renewable energy forms = ~0 kgC/GJ.

Bioenergy is 0 net emissions for the energy sector, but indirect land use change

emissions are accounted.

Methane emissions have a (100 year) Global Warming

Potential of

~25 gCO2/gCH4

12% of methane emissions was from natural gas in 2005.

Sources include: emissions from FF, e.g. coal mining, gas

transmissions & distribution, gas venting, etc., (also land use,

agriculture, animal husbandry, waste …)

May 29, 2013 27

-2

-1

0

1

2

3

4

5

6

2005 2050GT2000

2050GT2010

Rad

iati

ve F

orc

ing

(Wm

-2)

250

350

450

550

650750850

Co

nce

ntr

atio

n

(pp

mv

CO

2-e

q)

250

350

450

550

650750850

Co

nce

ntr

atio

n

(pp

mv

CO

2-e

q)

TOTAL RADIATIVE FORCING IS ONLY SLIGHTLY

ALTERED.

Will Abundant Gas INCREASE total GHG

emissions?

May 29, 2013 28

Radiative Forcing

CO2

CH4

N2O

Other Kyoto Gases

SO2

All Other Gases

Net Total

-2

-1

0

1

2

3

4

5

6

2005 2050GT2000

2050GT2010

Rad

iati

ve F

orc

ing

(Wm

-2)

250

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450

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650750850

Co

nce

ntr

atio

n

(pp

mv

CO

2-e

q)

-2

-1

0

1

2

3

4

5

6

2005 2050GT2000

2050GT2010

Rad

iati

ve F

orc

ing

(Wm

-2)

250

350

450

550

650750850

Co

nce

ntr

atio

n

(pp

mv

CO

2-e

q)

CO2

CH4

N2O

Other Kyoto Gases

SO2

All Other Gases

Net Total

CO2

CH4

N2O

Other Kyoto Gases

SO2

All Other Gases

Net Total

250

350

450

550

650750850

Co

nce

ntr

atio

n

(pp

mv

CO

2-e

q)

Increased fugitive methane emissions from natural gas extraction.

Reductions in coal use

Reduce cooling from SO2 from coal burning

Reduce fugitive methane emissions from coal mining.

Reduce Black Carbon emissions from coal burning.

Slightly reduced CO2 emissions from reduced biomass land use

change emissions.

Offsetting changes

May 29, 2013 29 Radiative Forcing Difference

CO2

CH4

N2O

Other Kyoto Gases

SO2

All Other Gases

Net Total

-0.5%

0.0%

0.5%

1.0%

1.5%

2.0%

Rad

iati

ve F

orc

ing

Dif

fere

nce

-2

-1

0

1

2

3

4

5

6

2005 2050GT2000

2050GT2010

Rad

iati

ve F

orc

ing

(Wm

-2)

250

350

450

550

650750850

Co

nce

ntr

atio

n

(pp

mv

CO

2-e

q)

-2

-1

0

1

2

3

4

5

6

2005 2050GT2000

2050GT2010

Rad

iati

ve F

orc

ing

(Wm

-2)

250

350

450

550

650750850

Co

nce

ntr

atio

n

(pp

mv

CO

2-e

q)

CO2

CH4

N2O

Other Kyoto Gases

SO2

All Other Gases

Net Total

CO2

CH4

N2O

Other Kyoto Gases

SO2

All Other Gases

Net Total

May 29, 2013 30

Other Considerations

Local and Regional Environmental Quality

The penetration of gas into the market reduces local and regional air

pollutants, e.g. black and organic carbon and sulfur emissions

These reductions confer non-greenhouse environmental benefits.

Ground water has been an issue and needs continued attention.

May 29, 2013 31

DISCUSSION

We have focused on scenarios with no specific climate or energy

policies.

Other researchers have obtained similar results—e.g. Brian

Fisher, IEA.

Interactions with other policies need analysis, e.g. renewable

portfolio standards that protect renewable energy forms from the

market penetration of gas.

While we have not had time to discuss here, Gas Trade Patterns

change significantly, e.g. the USA becomes a small net exporter

While we do not discuss the results here, we found little impact from

abundant gas on the cost of stabilizing climate forcing under

IDEALIZED POLICIES.

Non-idealized policies also need analysis. May 29, 2013 32

SUMMING UP

Natural gas has been increasing its market share for decades

Technologies that make commercially available gas more abundant

and less expensive accelerate this trend

This has major implications for competition among all primary energy

sources; for energy production, transformation, distribution and end

use; energy security; local and regional air pollution; investments in

facilities and infrastructure; supply and value chain interactions within

and among sectors and regions and trade

Gas displaces other fuels but does not significantly alter the overall

scale of the global energy system through 2050

Availability of abundant, less expensive gas through 2050 does not

significantly change

Global fossil fuel CO2 emissions or total radiative forcing, or

The carbon price required in an idealized mitigation scenario

May 29, 2013 34

END