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Natural Gas Industry: a dynamic industry and a bridgehead to sustainable energy supply

Natural Gas Industry: a dynamic industry and a bridgehead to sustainable energy supply. Auke Lont. 1. INTRODUCTION. What is Natural Gas? ‘relatively clean fuel with very low density’ 1 m3 = 11 kWh = 1 litre LFO CH4 Typical use Not used Homeheating Transportation

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Natural Gas Industry: a dynamic industry and a bridgehead to sustainable energy supply

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  1. Natural Gas Industry: a dynamic industry and a bridgehead to sustainable energy supply Auke Lont

  2. 1. INTRODUCTION • What is Natural Gas? • ‘relatively clean fuel with very low density’ • 1 m3 = 11 kWh = 1 litre LFO CH4 Typical use Not used Homeheating Transportation Power generation (liquid at – 160C) Petrochemical feedstock

  3. 2. some “ OLD TRUTHS” • 1975 Natural gas shall not be used for power generation • 1983 UK natural gas resource base rapidly declining after 1995 • 1984 USA Natural gas bubble will soon burst

  4. 2. “ OLD TRUTHS” cont. 1985 Norwegian gas production will stabilize at 40 BCM/YR 1975-95 Dutch Groningen Field will be depleted in 25 years

  5. EU DIRECTIVE 13.2.1975“restriction of use of natural gas in power stations” Whereas: Natural gas quantities available are limited Natural gas should be reserved for “premium” application

  6. EU DIRECTIVE 13.2.1975“restriction of use of natural gas in power stations” Now therefore: “ ... new contracts.., and construction of new power stations using natural gas must be subject to prior authorization... ... member states shall encourage cancellation of existing contracts for supply to power plants...”

  7. 3. Some FACTS

  8. EU DIRECTIVE 18.3.1991 • “.. whereas natural gas has specific advantages for the production of electricity in terms of limiting emissions of pollutants • .. whereas technological advantages have enabled natural gas to be used for electricity generation having advantages both of lower capital and operating costs and greater efficiency compared with units using other fuels.. • .. in view of the current developments on the gas market the restriction should not be retained..”

  9. GRONINGEN GAS FIELD(Netherlands) 3000 2500 remaining reserves 2000 1500 1000 cumulative production 500 2000 1974 0 74 76 78 80 82 84 86 88 90 92 94 Source: Ministry of Economic Affairs, Netherlands

  10. POWER GENERATION IN UK - natural gas- BCM/YR 25 25 20 15 10 5 0 0 1990 2000 1990 1992 1994 1996 1998 2000

  11. WORLD ENERGY RESERVES - natural gas vs oil - oil 140 120 100 natural gas 80 60 40 20 0 69 71 73 75 77 79 81 83 85 87 89 91 93 Source: BP, World Energy Review 2004

  12. WORLD REMAINING GAS RESERVES Remaining years of production 70 70 60 50 40 30 R/P oil = 40 years 20 10 0 68 70 72 74 76 78 80 82 84 86 88 90 92 94 1970 2003 Source: BP, World Energy Review 2004

  13. 4. WHY ARE WE OFTEN WRONG? • “Right forces, wrong model” Environment Natural gas industry Economic growth Technology Market Reserve base Regulatory framework

  14. UNDERESTIMATE 1) Power of technology • Power of the market • Power of the environment 4) Dynamics when forces meet

  15. Cost pr. m.1000 • . THE POWER OF TECHNOLOGY- drilling of wells- Cost pr m 1985 60 1985 50 40 30 1990 1995 20 1995 10 Horizontal length km 10 Horizontal length km 0 3,5 5 7,5

  16. THE POWER OF TECHNOLOGY - gas turbine - Cost per kW 1965 1980 2000 Efficiency% 20 30 40 50 0 50 Source: GE

  17. THE POWER OF THE MARKETderegulation UK gas industry • new supplies => new dynamics • new products UK electricity industry: natural gas substitutes coal Telecom Airline industry Interaction between markets and technology can reshape industries

  18. THE POWER OF ENVIRONMENTCO2-emissions in electricity generation kg/MWh 800 600 coal 400 200 gas 0 Coal

  19. 5. THE ENVIRONMENTAL CHALLENGE “ How to combine the natural gas potential with global warming challenges?”

  20. WORLD CO2-EMISSIONS 1000mt 29 29 29 27 22 22 coal coal 20 gas gas 10 oil oil 0 1994 2010 1994 2010 Source: IEA Econ PowerPoint presentation template

  21. KYOTO AGREEMENT 1. CO2-emission has a cost2. Cost effective solutions

  22. ENERGY CONSUMPTION VS ELECTRICITY CONSUMPTION - OECD - Index Electricity 2 Energy 1,5 1 0,5 0 2002 1971

  23. THE ENVIRONMENTAL CHALLENGE hydro nuclear 1. Stabilize/reduce energy consumption 2. Increase natural gas market share 3. Long term solutions for power generation -gas -nuclear -carbon capture and storage for coal coal natural gas oil

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