IEA Sees Larger Role for Natural Gas

LONDON (Dow Jones Newswires), June 6, 2011

Natural gas could be entering a "golden age" and become a much larger portion of the global energy mix as both supplies and consumption of the fuel expand rapidly over the next 25 years, the International Energy Agency said in a report published Monday.

However, the IEA, which represents the governments of energy-consuming countries, warned that countries shouldn't see natural gas as the only solution for climate change. Although it is the cleanest fossil fuel, only in combination with other measures can it achieve the carbon emissions cuts necessary to avoid dangerous climate change, it said.

Natural gas consumption could rise by more than 50% from 2010 levels and account for more than a quarter of global energy demand by 2035, the IEA said. This scenario would require an extra 600 billion cubic meters of gas production by 2035 on top of previous forecasts, equivalent to "one additional Russia", IEA Chief Economist Fatih Birol told reporters in London.

This scenario is predicated on certain conditions, notably the global development of unconventional gas resources, lower gas prices, a smaller expansion of nuclear energy following the Fukushima disaster and a big push for natural gas consumption in China, Birol said.

But the IEA cautioned that while an increased use of natural gas could boost energy security because its resources are abundant and more widely dispersed than oil, it shouldn't overwhelm other energy forms that could be better in addressing climate change.

Global carbon dioxide emissions would be around 160 million metric tons lower in 2035 if there is widespread switching from coal to gas as a fuel source in power generation, Birol said. However, a cut of that size would only be sufficient to keep the increase in global temperatures below 3.5 Celsuis, "which is unacceptable," said Birol. The scientific consensus is that the temperature increase should be kept below 2C.

"While natural gas is the 'cleanest' fossil fuel, it is still a fossil fuel," said the IEA Executive Director, Nobuo Tanaka. "Its increased use could muscle out low-carbon fuels, such as renewables and nuclear. An expansion of gas use alone is no panacea for climate change," he said.

Birol also warned that the unconventional gas industry needs to take other environmental concerns seriously. Shale gas drilling in particular has prompted fears of water table contamination that have set back its expansion in some parts of the U.S. and Europe.

"The golden age of gas hinges on whether or not the gas industry is able to address this issue," he said. Drillers need to have, "gold standards of safety," or the industry may not be able to expand to its full potential, Birol said.

Tanaka expressed a concern that governments have overreacted against nuclear energy following the recent Japan crisis.

Germany's decision to phase out nuclear power completely within 10 years could affect the energy security and sustainability of the whole of Europe, because it will increase German CO2 emissions and make the continent more dependent on imported fossil fuels, Tanaka said. As such, the decision should be discussed within the EU, he said.

"Because Germany is interconnected to other European countries so its decision has an implication for other players around," he said.

Copyright (c) 2011 Dow Jones & Company, Inc.


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