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Two possible natural gas crises

There is a strong potential for a natural gas crisis in the near term, that is within months or a few years. Arguments appearing in Supply Crisis Looms, by W. J. Simpson, closely resemble the arguments put forth here. [1] The same is true of When markets fail – America leaps off the gas cliff without a parachute by Julian Darcy. [11] The two articles could not be more different. The first is written calmly by an industry insider, the second is written passionately by an industry outsider. But both are well researched and both reach the same conclusion.

The coming short term natural gas crisis

Natural gas consumption is highly seasonal. It is high during the winter heating season and low during the summer, although the increased use of natural gas to make electricity is starting to change this pattern. Hot weather increases natural gas consumption because air conditioning requires electricity. Natural gas production is not seasonal, leading to the requirement of gas storage. Certain geological formations found in Louisiana are used as giant natural gas tanks. The tanks are fullest in October at the beginning of the heating season and emptiest in March at the end of the heating seasons. The Energy Information Administration (EIA) publishes a graph which is updated weekly [5].

Weekly Natural Gas Storage Report

The red line shows actual natural gas in storage, while the gray area shows the range observed in recent years. In this example, reserves were alarmingly low in April and March of 2003.

There are two scenarios that could lead to a serious natural gas shortage in the near future. The first involves weather. A hot summer followed by a cold winter would do it. The summer of 2003 was not especially hot allowing the replenishment of stored natural gas. That fall was mild and there was enough natural gas in storage for that current heating season. A crisis was averted only by luck. It could have been different. Natural gas demand has fallen a little in 2003 due to high prices. Some fertilizer production has already stopped permanently. Economists call this demand destruction. Some boilers are designed so they can run on oil or gas and they have switched to whatever is cheaper. Natural gas demand will not drop much more because the new gas turbine electric generators cannot switch. Gas fired heating systems cannot easily switch to oil. [10][3]

The second scenario involves Canada. Canada has nearly the same reserves to production ratio as the United States and Canada uses gas for heating to the same extent as the United States. Given the prospect of declining production, Canadians may decide they need their natural gas for domestic use. In addition, natural gas is important for the production of synthetic oil from the bitumen extracted from Athabaska tar sands. The amount of natural gas exported by Canada will decline and it appears that the decline started in 2003. [6]

Why are so few aware of this predictable crisis?

Like the coming oil crisis, the coming gas crisis does not seem to show up on the radar screen of the general public. Yet the basic facts are not in dispute. Nothing is being done to avert the crisis because the public is not aware of any crisis. However a few very public figures have issued unusually clear warnings after observing the alarmingly low reserves in May 2003.

"I'm quite surprised at how little attention the natural gas problem has been getting, because it is a very serious problem."
      --Alan Greenspan, May 21, 2003

Spencer Abraham remains concerned about natural gas supplies in the United States, and he expressed those concerns at the Natural Gas Summit, held in late June in Washington, D.C. Noting that U.S. natural gas storage is 32 percent below last year's level, and 22 percent below the previous five-year average, Secretary Abraham warned that next winter's heating bills could increase as much as 19 percent in the Midwest. "It is a national concern that will touch every American,"
     --Secretary of Energy, Spencer Abraham, July 1, 2003

Abraham was right. Natural gas increased by much more than 19% in December 2003.

The coming long term natural gas crisis

There is also a strong potential for a natural gas crisis in the longer term, that is within 5 or 10 years.

North America will probably experience a natural gas shortage before any other region of the world. North America has only 4.6% of the world's gas reserves but consumes 30.3% of the world's production. The reserves to production ratio is only 9 years. It is easy to see that present consumption rates cannot be maintained for long without importing large amounts of LNG via LNG ships. Venezuela is nearby but reserves there are equal to only 7 years of United State's consumption. The LNG ships will soon be forced to make much longer voyages when Venezuela cannot meet the demand.[2]

Some Notes About LNG ships

The volume of natural gas is reduced by a factor of 600 when it is liquefied. This volume reduction makes it feasible to transport natural gas via ship or truck, although liquefaction is expensive and energy intensive. LNG ships have large, insulated tanks capable of containing LNG at -161^o C. LNG ships, of recent design, can carry 140,000 cubic meters of LNG and they cost $170 million each. There were 140 LNG ships in the world in 2003. Japan, South Korea, and Taiwan import all of their natural gas on LNG ships. One ship can carry enough natural gas to supply the needs of the United States for one hour. Europe gets some natural gas via LNG ships. Europe has the possibility of getting natural gas via pipeline from the Middle East, Algeria, and even Nigeria. None of these options are available to the United States because pipelines cannot cross oceans. There are three LNG ship terminals on the east coast, one on the gulf coast, and none on the west coast. There is a proposal to build a terminal in Mexico, just south of San Diego. Many more will be needed within ten years. Alaska, Venezuela, Eastern Siberia, Algeria, and Nigeria will probably be important sources of LNG in the near term. [4] The Middle East and the former Soviet Union will be the important suppliers in the near and far term.

A loaded LNG ship carries an incredible amount of chemical energy. The chemical energy in a loaded LNG ship is equal to the explosive power of 55 Hiroshima size nuclear bombs. An attack on an LNG ship could release this energy in a ball of fire covering square miles. An LNG disaster killed 128 people and devastated a square mile in Cleveland in 1944. This disaster has made the LNG industry very cautious and this caution is reflected in the design of LNG ships and LNG handling facilities. LNG ships are double hulled, for example. The LNG industry has an excellent safety record. There is some concern that an accident or a terrorist attack could be devastating. [7]

The EIA (Energy Information Administration) projects that the United States will consume 46 trillion cubic feet of natural gas in 2025, compared to 27 trillion cubic feet in 2001. In 2025 the western hemisphere will be producing very little natural gas. China is growing ever more economically powerful and China will have probably consumed most of the natural gas in Eastern Siberia by 2025. Nigeria does not have enough natural gas to last until 2025 at current production rates. [4]

That leaves the FSU and the Middle East as suppliers of LNG in 2025. They have 75% of the world's natural gas in 2003 and so they will be the only plausible suppliers in 2025. Some of the liquefaction facilities will be on the Mediterranean and in Africa, but most will be on the Persian Gulf. Some of the LNG ships will reach the west coast by sailing the Indian and Pacific oceans, and some will reach the east coast by sailing the North and South Atlantic oceans. In either case, the LNG ships will sail 27,000 miles, round trip, to make one delivery to the United States. Each LNG ship will deliver, at most, about 4 loads in a year. This is based on a reasonable estimate of the time for loading, unloading, maintenance, and sailing. These numbers determine that 3924 LNG ships will be required in 2025. The cost of the ships alone will be $667 billion. This compares with $400 billion for the defense budget.

The EIA projects world demand of 176 trillion cubic feet in 2025. [4] This seems reasonable. It looks like a straight line projection from past numbers. There must be a presumption of low cost supplies, peace, and prosperity. These numbers do not mean that the EIA knows where the natural gas will come from. In any case, the system comprised of LNG ships, liquefaction terminals, and regasification terminals would be very expensive.

World reserves of natural gas reserves for the world were estimated at 5501 trillion cubic in 2002. [2] The majority of that will be gone in 2025 if EIA projections turn out to be correct. Consumption at the average rate of 140 TCF per year for 21 years would do that. If the same straight line projections are continued for 5 more years, the natural gas will be gone around 2032. It follows that peak production must occur before 2032. Efforts to increase  natural gas production will fail well before 2032. Natural gas distribution may become problematic. It would be hard to predict the year of peak natural gas production. But it is possible to say, with assurance, that increasing natural gas production cannot be maintained beyond 2025.

What can be done about these predictable crises?

Options are limited for the short-term crisis: hope for mild winters, cool summers, and practice conservation.

Japan, South Korea, and Taiwan already get their natural gas entirely via LNG ships. The United States soon will be forced to do the same. Conservation would be a good idea.

Natural gas will be mostly gone before the middle of the century in any likely scenario. The energy for the substitutes must come from sunlight or nuclear power. It is time to develop these substitutes. Extreme efforts at conservation will be required live with sustainable energy.

[1] http://www.petroleumnews.com/cgi-bin/start.cgi/homeauto.html  Petroleum News is a magazine catering to the oil and gas industry of North America. Click here to see Supply Crisis Looms which appeared in the May 2003 issue. This is an HTML file on this website so the link is unbreakable. It is significant that an article appearing in an industry magazine agrees with planetforlife and predicts the same crisis using similar arguments.

[2] http://www.bp.com/ British Petroleum (BP) is a major oil company that publishes oil reserves data from the Oil and Gas Journal in its annual Statistical Review of World Energy 2003. The data do not reflect the company's own assessments--it is simply republished data. The Review is widely referenced because it is convenient, complete, colorful and very well done. It is also big at 2.2 megabytes. BP's CEO, The Lord Browne of Madingley, is irascible and quotable. He says that BP now stands for "beyond petroleum." BP's new logo, which looks like a leafy sun, would seem to bear him out. BP is in the LNG business.

[3] http://www.simmonsco-intl.com/default.asp Simmons Company International has a very large website with many useful resources. Go to "Simmons News" to read what Matthew Simmons said March 2003 when he testified before the Senate Committee on Energy and Natural Resources. The Bush-Cheney team is aware of the issue of peak oil because international oil investment banker Matthew Simmons, who has written extensively and forcefully on depletion issues, was an advisor to Vice President Cheney’s Energy Task Force in 2001. This loads fast but the rest are slow loading PDF files. Also at the same website, view North American Natural Gas: Looking for the Relief Valve presented in April 2003 by Roger D. Read.

[4] http://www.eia.doe.gov/oiaf/ieo/nat_gas.html Official energy statistics from the U.S. government about natural gas.

[5] http://tonto.eia.doe.gov/oog/info/ngs/ngs.html The Department of Energy publishes a graph showing the amount of natural gas in storage. It is updated on a weekly basis.

[6] http://www.financialsense.com/editorials/powers/2003/1030.html An editorial entitled The Natural Gas Production Treadmill by Bill Powers. An excellent summary of the Natural gas problem for all of North America.

[7] http://www.timrileylaw.com/LNG.htm Website of Tim Riley, "Consumer Protection Advocate & Personal Injury Attorney." This intentionally alarming website points out that the chemical energy in a loaded LNG ship is equal to the explosive power of 55 Hiroshima size nuclear bombs. This figure is in substantial agreement with planetforlife calculations.

[10] http://www.renewwisconsin.org/ Renew Wisconsin is an excellent starting point. Learn about natural gas, oil, and renewable energy sources. A network of clean energy businesses, educators, utility managers, builders, farmers, state agency officials, environmental advocates, and concerned citizens.

[11] http://postcarbon.org/ When markets fail – America leaps off the gas cliff without a parachute, by Julian Darley. Presented at the US Natural Gas (crisis) Summit, June, 2003. A background to natural gas problems in North America.

http://www.naturalgasfacts.org/links/index.html American Petroleum Institute natural gas facts. Many useful links.

Click here to see Alaskan Natural Gas: How Real An Alternative Is It? by Joseph P. Mathew. The practical and economic considerations of building a natural gas line to Alaska. This is an HTML file on this website, so the link is unbreakable.

http://www.energypulse.net/centers/author.cfm?at_id=114 Energy Pulse provides "Insight, Analysis and Commentary on the Global Power Industry." Andrew Weissman writes lengthy and in-depth articles about natural gas, LNG and electricity generation. Highly recommended.

http://www.lngoneworld.com/lngv1.nsf/portal/index.html LNG OneWorld is devoted to the LNG industry. You can find the speed, the capacity, and the name of every LNG ship in the world here. You have to register to access this site.