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Michael Economides says natural gas supplanting oil Low gas replacement rates, increasing use squeezing supply, forcing prices up in Lower 48 Kristen Nelson PNA News Editor
Natural gas is in absolutely dire shortage right now, Michael Economides, professor of chemical engineering, University of Houston, told an Anchorage audience Sept. 11. Economides, co-author of “The Color of Oil,” said the price of gas is going to hit $7 a thousand cubic feet this winter and will probably spike to $40 an MCF some cold night in Boston or Chicago.
Gas is going to be the energy issue for the next 10 years or more, he said, and while it is popular to talk about fuel cells and the hydrogen economy, that hydrogen in the foreseeable future is going to come from natural gas.
By 2020, he said, “natural gas may actually reach 47-50 percent of the energy mix. It’s going to be an absolute revolution. And I do believe that once you go gas, there is no going back.” Oil and gas used to be competing energy sources, then there was a situation with almost no overlap, and now there is competition again. But, Economides said, “over time, oil will gradually become a source of materials exclusively.” Sources of natural gas Gas is cheap and abundant, he said, has about half the carbon emissions of oil and coal and customers prefer it.
“There is a clear momentum toward natural gas — no question — in the most influential of all markets, the United States.” With deregulation, he said, practically every power plant that will come on line in the next three to five years is going to be gas fired. There is, Economides said, a three-year back log at General Electric for gas-fired turbines for power plants.
Gas used to be stored in the summer for winter use, “but now you have an emergent summer peak,” he said, “as natural gas becomes increasingly used for power generation. … The summer peak five years from now may actually surpass the winter peak.”
Future sources of gas, he said, will be the Gulf of Mexico, Canada and the Alaska North Slope. He said he’s heard people talk about getting ANS natural gas to market in the Lower 48 in five years, but thinks seven years is a likely timeframe. The international natural gas market is underdeveloped, but is coming to life, Economides said, in South America, Trinidad and the Middle East. The age of hydrogen In the United States, he said, all forecasts of natural gas supply over the next five years appear to significantly lag even the most conservative estimates of demand. “Putting it in simple language,” Economides said, “we’re going to have a hell of a shortage of natural gas.” He predicted an increasing shortage over the next two or three winters, and said both facilities to receive liquefied natural gas and incoming pipelines will be needed.
The age of hydrogen will dawn by 2005, Economides said, but the immediate source of hydrogen will be natural gas, and he predicted that immediate forecasts of natural gas use are low. To start, usage will be 1.5 times conventional forecasts, he said, two times by 2005 and 2.5 times by 2010. By 2020, Economides expects that natural gas will make up 45-50 percent of the worldwide energy mix, some 250 trillion cubic feet a year.
Where will it come from? BP, he said, is talking about using hydrates within the next 25 years. There are plans for $100 billion in deepwater platforms in the Gulf of Mexico with ultra-deep natural gas projects “rationalized de facto by expected higher natural gas prices.” LNG permit applications are showing up in the Houston press as well as projects such as an “under the Caribbean pipeline.”
The price floor for natural gas used to be $1.50 per thousand cubic feet, he said, but is now $3.50: “We’re going to kiss $7 an MSCF this winter for sure” and spot market will depend on how cold the winter gets. But, Economides said, he doesn’t expect to see $3 gas again in his lifetime. It’s a new benchmark, he said.
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