Gas on collision course
One-time ‘clean energy’ linked by researchers to coal based on release of methane
for Petroleum News
For years natural gas has sheltered itself in a self-proclaimed world of clean energy ... well, at the very least, cleaner than its first cousin, crude oil.
Now that boast, which has just started to generate handsome returns from such products as liquefied natural gas and compressed natural gas and renewed Canadian optimism in the resource, is coming under assault.
A fresh analysis from Global Energy Monitor, GEM, a global network of researchers tracking fossil fuel projects, has produced a blunt warning that natural gas, rather than being a partial answer to climate problems, is instead the “new coal.”
The explosion of spending on new LNG facilities - most of them in the U.S. and some in Canada - will be accompanied by new calculations for methane leakage from the LNG supply chain, warns the report titled The New Gas Boom.
It said the combination of plunging renewable energy costs and rising climate change concerns will make many LNG projects “unprofitable in the long term,” putting much of US$1.3 trillion of investment in the sector at risk.
Issue ‘fugitive gas’The so-called “fugitive gas” could see the world spurn gas in the same way it has mounted a threatening campaign against crude oil, the report suggested.
James Browning, one of the authors, said new research has proved there is considerably more fugitive gas than studies found five years ago, and the gas is “also a bigger contributor to climate change than was understood.”
Methane, the main component of natural gas, is reckoned to be 30 times more harmful than carbon dioxide emissions through a super-heating effect that could be twice as damaging as the current installed base of coal in the United States, GEM told CNN Business.
The report said the falling cost of LNG technology has resulted in at least 202 world-wide LNG projects in the development stage, including 116 export terminals and 86 import terminals, with that development concentrated in North America.
Warning to investorsThat has prompted the authors to issue a warning to those who are investing in LNG, undercutting an estimate by the Canadian Association of Petroleum Producers that Canada could meet domestic consumer demand for the next 300 years.
While most of the LNG industry confidently rides the wave of vast supplies and rising demand it is being faced with a tidal wave of international agreements to lower natural gas consumption, which could deter lenders and investors if the “new coal” label takes hold.
Browning said that countries suffering the impact of climate change will soon be looking for less costly alternatives to gas, especially as it becomes clearer that escaping methane from drilling and shipping can make gas as damaging as coal.
Already, India, which is suffering from rising temperatures, is discovering that solar energy is cheaper than fossil fuel alternatives.
Search for fixesThe gloomy GEM assessment only compounds the frantic search by the Alberta government of Premier Jason Kenney for ways to reverse the fortunes of a resource that is vital to its economic well-being at a time when scores of smaller producers are facing threats of bankruptcy at a time of rock-bottom commodity prices.
The government and producers are searching for fixes, including possible production cuts.
“There’s certainly a concerted effort to fix what is going to be a pretty significant crisis this fall,” said Tristan Goodman, president of the Explorers and Producers Association of Canada.
“I get the impression that the government is really interested in working with everybody to get some stability in the market,” he said.
The immediate response from the Kenney administration is to offer tax relief this year for shallow gas producers by lowering municipal taxes on shallow wells and pipelines by 35% - a one-time deal that will be covered by the government.
It will benefit about 30 companies operating upwards of 66,000 wells in southeastern Alberta.
A government official confirmed that in future years the tax rate will be lowered.
But many of the challenges are viewed as intractable, such as volatile prices, infrastructure constraints, shrinking markets in the United States resulting from shale gas, investor apathy and growing liability from abandoned wells.
Goodman said the government action “corrects, fairly rapidly ... the