Publications

Survey of Energy Resources 2007

Natural Gas: A Successful Energy

Over the past decades, natural gas use grew unabated, demonstrating its major role as a world-scale energy source. It currently accounts for 23.5% of the world energy mix and ranks third, behind oil and coal. This expansion was sparked by many essential breakthroughs.

Technological breakthroughs.
While the gas industry largely benefitted from technological innovation in the upstream oil industry, specific new technologies spectacularly extended the possibilities of transporting this energy source, hamstrung by the fact that it is necessary to transport a volume 1 000 times larger than oil for the same energy content, making gas transportation at least five times more expensive. Natural gas liquefaction, long-distance pipelines and deep offshore pipe-laying tremendously improved gas supply.

Gas flows between countries and continents accordingly grew unchecked, accompanied by the installation of new, sophisticated and costly transport chains. In 2006, international flows were close to 886 bcm, covering about 30% of marketed production.

Downstream, combined-cycle gas-fired power plants have revolutionised the power sector, transforming it into the locomotive for world gas growth. Besides technical and economic performance, produced by efficiencies as high as 58%, combined-cycle power plants also offer compact facility design, a reduction in construction time and investment, plus better space integration.

Gas price competitiveness.
The competitiveness of gas prices has been sustained by the efforts made by the industry to reduce costs at every stage in the chain. The use of advanced technologies in seismic imaging and drilling, as well as improvements in capital expenditure and operating costs, were responsible for a steady 2.5% p.a. fall in exploration & production costs until relatively recently. The industry also very significantly improved liquefied natural gas (LNG) competitiveness, cutting costs at all stages of this complex chain. Greatly improved overall design of LNG projects, in tandem with the characteristics of gas supply in the upstream sector and those of regasification plant outlets, optimised project construction, and a systematic attempt to shorten construction deadlines helped to cut costs. As an illustration, the average unit investment cost for a liquefaction plant dropped from US$ 250/t/yr in the mid- to late-1990s to US$ 200/t/yr entering the new millennium.

The netback market value approach (pricing gas in relation to competing fuels in the end-user market), which has traditionally been the basis of gas pricing throughout the gas chain in major consuming countries, in Europe for instance, has also played a role in securing gas market growth.

Exploration successes.
Since 1980, proven world natural gas reserves have grown at an annual average of 3.4% (compared with 2.4% for oil), due to an impressive string of gas exploration successes and better assessments of existing fields. Hence the volume of proven gas reserves more than doubled over the period, from about 77 tcm in 1980 to some 177 tcm in 2006, growing at a roughly linear rate over time in the range of 4 tcm/yr. The life duration of proved reserves, as a ratio to current consumption, is in excess of 56 years. (Fig. 5-1 )