Natural Gas as a Transportation Fuel: Overview and Context Benjamin Schlesinger and Associates, LLC Bethesda, Maryland 2013 Summer Meeting of the Freight, Marine and Planning Committees Transportation Research Board The National Academies Washington, DC – July 18, 2013 1
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Natural Gas as a Transportation Fuel: Overview and Context
Benjamin Schlesinger and Associates, LLC Bethesda, Maryland
2013 Summer Meeting of the Freight, Marine and Planning Committees Transportation Research Board
The National Academies Washington, DC – July 18, 2013
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Outline
u Introduction u Gas supply: shale gas (and shale oil) u Gas demand in crisis – transportation and other ‘new’ uses u Conclusions.
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Here, ‘gas’ is methane = natural gas (compressed or liquefied), not liquid propane gas (LPG), natural gas
liquids (NGLs) or gasoline
BSA – 29 years of gas and energy advisory services.
u Economics, pipeline tariffs, contracting, price risks. – Research & training – Negotiation of gas contracts – Due diligence – Review for lenders
in financing of LNG, power plants, gas storage
– Expert in courts & arbitrations, testified in 16 jurisdictions.
u 600+ assignments u 27 countries.
Cients: Energy buyers & sellers, electricity and heating plants, gas and oil pipelines,
banks, governments, universities.
Expertise Major Assignments
Power generators Lenders Pipelines/traders LNG projects Regulators Expert testimony
UNECE European pipelines GdF Suez, Repsol, BG Eastern Europe West African pipeline Sonatrach (Bechtel) Japan gas utilities
Mitsubishi Philippine NPC
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Despite all the words and numbers, people still don’t really grasp this.
u The ship arrives. u Were it a country, domestic shale-
fields would be the world’s 3rd largest gas producer.
u Many policy, economic, academic and environmental studies are very outdated, e.g., from Internet/Google.
u Shale ‘debate’ is lost on most people.
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Estm. US Shale Gas Production, Bcf/day
0
5
10
15
20
25
30
2000 2002 2004 2006 2008 2010 2012
Rest of US Bakken (ND) Eagle Ford (TX) Marcellus (PA and WV) Haynesville (LA and TX) Woodford (OK) Fayetteville (AR) Barnett (TX) Antrim (MI, IN, and OH)
Source: EIA Administrator Adam Sieminski, 5/2013.
US has added 4.6 MBD equivalent of shale gas production since 2001.
1.1 2.0 2.7 4.2
2.7 3.7
11.5
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2.0
4.0
6.0
8.0
10.0
12.0
14.0
Holland Norway Qatar EU, Total Venezuela Iran Saudi
MB
D, e
quiv
alen
t
Annual US shale gas production (just the growth)
Source: BSA 2013, from BP Statistical Review 2013 & EIA (est. shale production).
Gas Production, 2012 Oil Production, 2012
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…plus: over 2 MBD rise in US shale oil production, so far.
How long will North America’s big hydrocarbons price gap persist?
Source: BSA 2013, from EIA, CME-NYMEX, July 12, 2013 Settlements. 6
High crude oil prices attract rigs away from gas-prone shale fields.
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1.0
2.0
3.0
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8.0
9.0
Jan-
01
Jan-
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Jan-
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Jan-
07
Jan-
09
Jan-
11
Jan-
13
Jan-
15
Jan-
17
Jan-
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WTI/HH Actuals WTI/HH Futures
Oil Rigs/Gas Rigs
u Past: Crude prices rose while gas prices fell, until crude prices averaged 6x gas price in 2012 – drillers moved off to oily shales: – Eagle Ford, Texas – Bakken, North Dakota – Utica, Ohio
u Today: $96 crude oil is 4x gas ($16.55/MMBtu versus $4.10).
u Outlook: Oil prices and oil drilling rigs both at 3-to-one over natural gas, until gas production falls and its price rises.
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Crude Oil-to-Gas Ratio
Price of crude / gas (actual)
Price of crude / gas (NYMEX futures)
Rigs drilling for crude / gas
Source: BSA 2013, from CME-NYMEX, futures at 3/28/13, Baker Hughes U.S. weekly rig count.
US production of tight oil and NGLs is now rising as dramatically as natural gas did.
u Emerging shale plays are forcing new technologies: – Multi-well/multi-stage – Recycling of return waters – New tech (dry fracking, CO2).
u Major challenges: – Low gas and NGL prices (tends to
self-correct) – Pipeline bottlenecks, both gas and
oil (flaring) – High cost of rail – Environmental & safety issues? – Skilled labor shortages.
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MB
D
Source (chart): EIA Administrator Adam Sieminski, June 2013.
EIA’s US Gas Production to 2035
9 Source: EIA, AEO 2013 Reference Case.
US natural gas markets are saturated; need more
places to put gas!
Most near-term surplus gas will be spent replacing coal in aging power plants.
- 20 40 60
10 Source: BSA 2012, coal plants in 20 Northeast and Mid-West states from EIA, plus Ontario; map from AEP.
Newer than 30 years, 12%
30-40 years, 27% 40-50 years, 33% 50 years or older, 28%
Coal-Fired Plants, MW Retiring Coal-Fired Plants
The good news: Replacing old coal with new gas reduces CO2 emissions by 63-72%.
Average Age of Plants
at Retire-ment
No. of Plants
Retired in Each
Year
Total Net Summer Capacity,
GW
CO2 Reduction Replacing
Bituminous Coal with
Gas
2009 50 12 0.5 67.7%
2010 54 35 1.5 69.4%
2011 62 31 2.5 63.3%
2012 56 57 8.9 63.9%
2013 55 14 2.1 71.7%
2014 57 34 4.7 64.4%
2015 57 61 9.9 63.1%
u GHG reduction due to: – Chemical advantage: Gas burning
emits 46% less CO2 than coal. – Efficiency advantage of new gas
CCGTs versus old coal boilers: 55-60% vs. 31-33%.
– Carbon emissions savings from fuel cycle as well.
u Other criteria air emissions reduced/prevented, especially sulfur, particulates, oxidants.
u But the “low-hanging fruit” might all be picked by 2020.
11 Source: BSA 2012, from EIA and Siemens data.
Global firms plan to spend $80 billion on new US gas-based industries.
u About 100 new manufacturing plants in development: – Chemicals & petrochemicals – Fertilizers – Steel & aluminum – Tires, plastics – Gas to liquids
u Most sited near the Gulf Coast. u If all proceed, added gas
demand will reach 11 Bcf/day by 2035.
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0
2
4
6
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2018 2035 B
cf p
er d
ay
Incremental gas demand
Source: Dow Chemical, 2012.
Natural gas (CNG and LNG) has begun to find markets trucking, rail and ships.
forklifts, compressors u Lower mileage personal vehicles
will benefit more from electricity: – $4 natural gas vs. $32 gasoline
(per MMBtu) – 61% efficient CCCTs vs. 26%
efficient piston engines – No wonder electricity = 79 c/gal!
14 Source: BSA 2011, from NYMEX, EIA data.
In some regions, battery EVs are, in effect, just very high-efficiency NGVs.
u Production of methanol and gasoline from natural gas (GTL) will also become options, as price differentials remains favorable.
15 Source: Schlesinger / Tesla Motors.
Benjamin Schlesinger and Associates, LLC The Bethesda Gateway 7201 Wisconsin Avenue, Suite 740 Bethesda, MD 20814 Phone: (301) 951-7266 Fax: (301) 951-3381 Visit us at www.BSAenergy.com
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Extra Slides
Gas supplies 27% of US primary energy – coal supplies 42% electricity.
18 Source: BSA 2013, from EIA data for 12-mo. year-ending 10/31/2012.