Natural gas is the only fossil fuel capable of getting good press these days. Its fans regularly rhapsodize about its merits, calling it an extraordinary fuel that's cheap, domestically abundant, and clean. Well, cleaner than oil, at least. Meanwhile, everyone from Texas oilman T. Boone Pickens to the Sierra Club is promoting natural gas as the key that America needs to free itself from its century-long addiction to oil. After all, the nation's appetite for oil means that nearly 60 percent of the petroleum consumed each year must be imported, much of it from unstable or unsavory regimes in the Middle East, Africa, and Latin America.
Pickens, along with a growing number of groups, wants America to slash its oil consumption by making better use of natural gas. In theory, the plan sounds simple. Around 22 percent of the natural gas burned each year is used to generate electricity. If wind energy were substituted for gas at power plants, the freed-up natural gas could be used instead to fuel ground transportation systems, starting with diesel-burning fleet trucks and buses. Advocates say this plan could cut U.S. oil imports by up to 38 percent.
Yet if the nation makes the switch from oil to natural gas to run its vehicles, will it simply be trading one foreign-dependent fuel for another? The answer is, probably. But to what extent is very hard to say. "Welcome to uncertainty," says Gordon Kaufman, a professor emeritus and oil and gas expert at the Massachusetts Institute of Technology's Sloan School of Management.
Currently, only 16 percent of the natural gas America consumes is imported. That's much better than oil, of course, but it doesn't eliminate foreign supplies. And while most of what is imported today comes from Canada by pipeline, Canada is increasingly using more of its gas domestically. That means any expansion in U.S. demand would almost certainly have to draw upon other foreign sources, which would ship it to U.S. ports as liquefied natural gas, or LNG.
Russian roulette. It's not encouraging to look at where the Earth's concentrations of natural gas lie. Three countries have more than 55 percent of the world's proven reserves: Russia (25.2 percent), Iran (15.7 percent), and Qatar (14.4 percent). Other countries that have fairly substantial reserves include Saudi Arabia, the United Arab Emirates, Nigeria, and Algeria. "It is hardly politically a smart move to rely on these countries for supplies," notes Martin Blunt, a professor of petroleum engineering at London's Imperial College. Russia, for instance, has twice used its gas resources as a political weapon by turning off supplies to its European neighbors, most recently last winter.
Moreover, even if U.S. companies wanted to buy Russian gas, not much would be available in the short term. While Russia pipes a lot of gas to Europe, it hasn't gotten heavily involved in the LNG market so far.
Natural gas is also gaining in popularity worldwide. Global consumption could increase more than twofold in coming years, and that could make for a very competitive and unreliable international market. Exporting countries will ship gas to wherever they can get the best price. And countries like Japan and South Korea, which are much more reliant upon imports than the United States, have shown a willingness to pay top dollar. Japan imports more than four times as much LNG as the United States, while South Korea imports nearly 58 percent more. "We would be competing with everyone," says Steve Gabriel, an expert on natural gas markets at Resources for the Future. "If we have to get into the international market, we might have a problem."
So, what about those bountiful domestic supplies that proponents talk about? Can they free the country from the clutches of foreign suppliers? Perhaps, but probably not entirely. The Energy Information Administration says that U.S. dependence on foreign natural gas could drop from 16 percent to 3 percent by 2030 if it takes full advantage of so-far untapped reserves. That would include tapping unconventional sources, mainly from shale, opening up Alaska's gas fields, and mining the gas beneath the ocean along the outer continental shelf.
"But those are big 'ifs,' " says David Pumphrey, deputy director of the energy program at the Center for Strategic and International Studies. For instance, there's a fair amount of political and environmental opposition to going after the Alaskan and OCS gas. Some are worried, for example, that an Alaskan pipeline could damage Arctic permafrost.
Shale gas may be the easiest and least controversial of these resources to mine. But it has only been in recent years that new technology—a form of horizontal drilling initially perfected and used to great success in the Barrett shale of north Texas—has made shale gas accessible. Accordingly, estimates of the size of U.S. shale gas deposits are rising. The Potential Gas Committee, an independent U.S. body of energy experts, delivers its biennial report on U.S. gas reserves in April; it says it expects to note that there has been "a significant increase in technically recoverable shale gas resources."
Still, even the rosiest scenarios could be tripped up by cost. Mining unconventional gas is a much more expensive proposition than releasing it from traditional sources. "There's definitely a lot of gas in the ground," says Tony Meggs, BP's recently retired group vice president for research and technology. "The issue is not whether it's there as much as whether you can get it out at any reasonable cost."
Here's the quandary: If natural gas prices are low enough to make it an attractive alternative to consumers, it may not be financially worthwhile to extract the hard-to-get stuff from shale or the seas. Last summer, natural gas was selling for around $14 per million British thermal units; by December, the price was under $6. The result? In December 2008, there were 400 fewer gas rigs operating in the United States than six months earlier. It's also difficult to argue that natural gas is a cheaper alternative to oil, because its price tends to move in tandem with oil prices. And when the price of gas occasionally decouples itself from oil, that's not necessary a good thing. "Its price is often more volatile than oil's," Pumphrey says.
Power switch. Even if the economics and technologies of extraction somehow converge to produce a plentiful supply, it would be difficult and costly for the United States to switch from gasoline to natural gas to power automobiles. Gasoline's retail infrastructure is as convenient as it is efficient, and most Americans are never very far from a filling station. Building a new and just-as-easy-to-use natural-gas retail distribution system from scratch would cost billions of dollars, and it's not clear who would pay for it, particularly if there are doubts about consumer demand. "That's something I can't get my arms around," admits Melanie Kenderdine, an associate director at MIT's Energy Initiative. "If you can't, to a maximum extent, use the existing infrastructure, you will run into enormous resistance."
For a switch to work fully and extend beyond truck and bus fleets, it would also require millions of consumers to convert their cars to run on natural gas instead of gasoline. The time, effort, and cost it would take for manufacturers to make—and for consumers to buy—a new breed of car that's affordable would be enormous, even if automakers were willing to produce it. The only natural-gas car on the market today, the Honda Civic GX, is hardly a bargain. It has a sticker price of $25,190—nearly $10,000 more than a normal Civic— and can travel only 170 miles on a tank of fuel.
Pricey. Can millions of consumers be persuaded to retrofit their cars? The cost of converting a gasoline car to natural gas ranges from $12,500 to $22,500. That's pretty expensive, even though 50 to 80 percent of the cost can by offset by federal tax credits. And, in fact, only a handful of large sedans, pickups, and passenger vans currently are capable of being retrofitted. Meanwhile, a gallon equivalent of compressed natural gas at the pump is less than a dollar cheaper than a gallon of gasoline. That's not the kind of price break likely to compel many people to make such a big upfront investment. "When oil was $140 a barrel, a lot of things that looked economical then no longer look so economical now," Gabriel says. Of course, many oil experts say that once the recession ends, oil prices will skyrocket once again; the EIA predicts a barrel of oil will sell for $189 by 2030.
Nevertheless, many believe that natural gas remains better suited to generating electricity than powering trucks and cars. For one thing, BP's Meggs notes, producing electricity more cleanly should be a higher priority. Globally, 40 percent of carbon dioxide emissions spew from power plants, double the amount that comes from ground transportation. Moreover, natural gas is a wonderful complement to wind as a power source. Wind power can be intermittent. That requires a backup fuel supply that can be switched on instantly when the wind dies and switched off just as quickly when it starts blowing again. Natural gas is the only fuel capable of performing that task.
Clearly, natural gas has a prominent role to play in America's energy mix. But whether it's capable of truly freeing the country from dependence on foreign fuel suppliers and whether it will ever be that much cheaper than oil, well, the answers to those questions remain as murky as a gallon of crude. l
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