Will Natural Gas Save Us?

My message to the BRC became my latest post of the Energy Collective yesterday. It has not collected many readers so far, but it has collected several comments. Kiem commented,

"Disruptive innovation, disruptive technology is called for."

We have it already, its called shale gas. There is so much shale gas it will provide for our needs for the next 200 years. It is everywhere and it is cheap cheap cheap! Wahoo!

I responded,

Kiem, you are right that the story is being told that shale gas is disruptive, however, other stories are being told and they have not been disproven. The stories are that the shale gas reserve is a whole lot less than claimed.shale gas is not nearly as good for carbon mitigation as claimed, and that shale gas is not good for the aquifer water supply. Until these stories are demonstrated false, shale gas cannot be 100% relied on.

Geoffrey Styles responded,

Charles,

Even if all those caveats were correct, and I have reason to believe they're not, shale would still be disruptive, because it is already disruptive. To wit, the quantity of shale gas already being produced, contributing roughly a quarter of US gas output today, has in just a few years: reversed the seemingly inevitable growth of US natgas imports, slashed domestic natgas prices--in the process altering the global market for LNG and enabling gas-fired power to capture significant market share from coal--created a realistic possibility of displacing part of our oil use in transportation with gas, and made some wind power installations less attractive. That's as disruptive as anything I could have imagined a few years ago for this time frame.

Geoffrey usually has good sense, but I cannot agree with these contentio0ns. However, Even if fraking accomplishes everything expected of it by the UnitedStates Energy Information Agency, and the EIA offers by far the most optimistic estimate of farkings impact on future United States natural gas production, fraking will do little more than prevent the decline of the United States's natural gas production. Conventional gas production has already peaked in the United States. Geoscientist, David Hughes, in a recent report from the Post Carbon Institute titled, Will Natural Gas Fuel America in the 21st Century writes,

Even assuming the EIA forecast for growth in shale gas production can be achieved, there is little scope for wholesale replacement of coal for electricity generation or oil for transportation in its outlook. Replacing coal would require a 64% increase of lower-48 gas production over and above 2009 levels, heavy vehicles a further 24% and light vehicles yet another 76%. This would also require a massive build out of new infrastructure, including pipelines, gas storage and refueling facilities, and so forth. This is a logistical, geological, environmental, and financial pipe dream.

Hughes points out the usefulness of Natural Gas:

Natural gas is a very versatile fuel with major uses in all sectors except transportation, where it is mainly used in the pipeline transport of natural gas and to a very limited extent for compressed natural gas (CNG) vehicles (Figure 5). Natural gas is a primary feedstock in the petrochemical industry and underpins the production of nitrogen-based fertilizers, which are responsible for the “Green Revolution” that has improved crop yields by nearly 200% over the past 80 years. Industrial use of natural gas accounted for 32% of its consumption in 2009. Natural gas is also a very useful fuel for distributed use, as in residential and commercial heating applications, and in 2009 these sectors accounted for 21% and 14% of its use, respectively. Electricity generation accounted for a further 30% of U.S. natural gas consumption in 2009, mainly in “peaking” power plants. Peaking plants are used to meet peak electricity demand loads, as opposed to providing base load power, primarily because of fuel costs; however, some of the larger combined-cycle gas plants are used for base loads.

These comments suggest that it may be desirable to conserve natural gas for industrial uses such as the production of nitrogen-based fertilizers rather than use it to generate base load electricity. But even if the government and/or the market do not decide on a conservation stratigy, dramatic increases in natural gas production seem very unlikely, Hughes notes,

U.S. natural gas production hit its all-time high of 21.73 trillion cubic feet (tcf) per year in 1973. Up until the late 1990s, the majority of U.S. gas production came from conventional reservoirs, which are pressurized pools of free-flowing gas trapped beneath impervious seals. Unconventional gas from coalbed methane became important in the early 1990s and was once heralded as a panacea to offset declines in conventional production, although now coalbed methane production is forecast to decline in the future (see Figure 16). Production from unconventional, very-low-permeability reservoirs in the form of tight gas sands and shale gas became significant in the late 1990s and especially over the past six years.

Hughes notes that,

Natural gas production is a story about a race against depletion. Typically, the production from a new conventional gas well will decline by 25% to 40% in its first year, before tapering off to lower yearly declines as time goes by. The overall yearly decline rate of all U.S. gas wells has been estimated at 32% by EOG Resources.25 This means that gas production would decline by a third each year, if no new wells were drilled. Sixty percent of U.S. gas production in 2006 came from wells drilled in the prior four years according to the EOG estimates. Chesapeake Energy has estimated that as of year-end 2007, nearly half of U.S. production came from wells drilled in the previous three years. So in order to keep overall gas supply from declining, drilling activity must be sustained.

Natural gas production is also a story about a rapidly increasing number of producing gas wells and a declining amount of gas produced from each. There are now more than half a million producing gas wells in the United States, nearly double the number in 1990 (Figure 10). Yet the gas production per well has declined by nearly 50% over this period. This is a manifestation of the law of diminishing returns, as a complex infrastructure nearly 100% larger than that in 1990 must be maintained today to achieve a 21% increase in natural gas production.

But what about the argument that the United States has a Huge natural gas reserve? Hughes responds,

In a 2011 report, the U.S. Potential Gas Committee (a non-profit organization made up of members of the natural gas industry) estimated total U.S. gas resources at 1739 tcf of probable, possible, and speculative resources (of which 687 tcf are shale gas) and a further 159 tcf of coalbed methane, for a total of 1898 tcf.31 Coupled with proven reserves of 272 tcf, this indicated a potential of 2170 tcf. It has been widely reported that the United States “has 100 years of gas” even though 2170 tcf, if it could actually be recovered, would last much less in actuality given the proposed ramp-up of shale gas production and the proposed increased use of gas for electricity generation and vehicle transport.

As mentioned earlier, the most important consideration for the outlook of natural gas is not the estimated volumes of potential resources and proven reserves in the ground, it is the rate at which they can be produced to meet present and future demand. Of the potential resources identified by the U.S. Potential Gas Committee, two-thirds are in conventional and unconventional tight sand and coalbed methane reservoirs, sources that are projected to decline in production going forward. Virtually all growth in gas supply in the current EIA reference case is projected to come from shale gas, which constitutes only a third of estimated U.S. gas resources.

Yet, Hughes argues that the long term potential for shale gas production is very poor, A

key aspect of shale gas wells is the high rate at which their production declines. Conventional gas wells typically decline by 25% to 40% in their first year of production, whereas shale gas wells decline at much higher rates, typically between 63% and 85%.42 The initial productivity of shale gas wells can be very high. In plays like the Haynesville Shale in Louisiana, initial rates can be more than 10 million cubic feet per day (Barnett Shale wells are typically much lower at about 2 million cubic feet per day). However, their steep production decline rates suggest that relying on shale gas for a large proportion of U.S. gas production will only exacerbate the “exploration treadmill” problem of the number of wells that must be drilled to maintain production.

Hughes report offers a devastating critique of the "natural gas will save us" canard. Hughes does not simply offer the worst case scenario. He offers us the best case scenario from the EIA and analyzes it, demonstrating in the process that Natural Gas offers more hype than hope. Unfortunately, Richard Heinberg's Foreword to the Hughes' report does not offer us the same high quality. Heinberg tells us,

It is past time for policy makers to get serious about the most important strategy we can and must adopt in order to succeed in this new era—energy conservation. Reducing demand for energy and using energy more efficiently are the cheapest and most effective ways of cutting carbon emissions, enhancing energy security, and providing a stable basis for economic planning.

Unfortunately, energy supply limits and demand reduction do not support robust economic growth. This is probably the main reason why policy makers and many energy analysts and environmentalists shy away from conveying the real dimensions of our predicament. However understandable this response may be from a political perspective, it is one that only compromises our prospects as a nation and a species. There is much we can do to ensure a secure social and natural environment in a lower-energy context, but we are unlikely to take the needed steps if we are laboring under fundamentally mistaken assumptions about the amounts of energy we can realistically access, and the costs of making that energy available.

This is nonsense. Heinberg's contentions about the limitations of the energy supply are not supported by Hughes analysis, and in fact an affordable shift to advance nuclear technology will yield an energy supply that will last for millions of years.

Update: Geoffrey Styles has clarified his views. He definition of Disruptive Innovation is somewhat different than the one I was pressing in the Message to the BRC post on the EC. His concept of a disruptive innovation only requiters, that market related decisions by competitors be effected. Geoffrey wrote,

if that's your definition of disruptive I'd suggest it's far too strict, at least in terms of economic disruption. Because prices are set at the margin, a much smaller erosion of market share than you propose could drastically alter the profitability of the coal industry or the refining industry. Ask refiners whether displacing 7% of their gasoline output with ethanol has affected their margins.

Although Geoffrey is correct that this is an example of disruptive innovation, it does not fit well into lists of disruptive innovations, which focus on replacement technologies:

* Personal computers replacement for Minicomputers, Workstations. Word processors

* Downloadable Digital Media replacement for CDs, and DVDs.

* Mini steel mills replacement for vertically integrated steel mills

* Digital photography replacement for Chemical photography

It would appear that the concept of disruptive innovation needs to be better articulated.