1. Natural Gas Industry: a dynamic industry and a bridgehead to sustainable energy supply Auke Lont

2. 1. INTRODUCTION  What is Natural Gas?  ‘relatively clean fuel with very low density’  1 m3 = 11 kWh = 1 litre LFO CH4 Typical useNot used Homeheating Transportation Power generation(liquid at – 160C) Petrochemical feedstock

3. 2. some “ OLD TRUTHS” 2. some “ OLD TRUTHS”  1975Natural gas shall not be used for power generation  1983UK natural gas resource base rapidly declining after 1995  1984USA Natural gas bubble will soon burst

4. 1985Norwegian gas production will stabilize at 40 BCM/YR 1975-95Dutch Groningen Field will be depleted in 25 years 2. “ OLD TRUTHS” cont. 2. “ OLD TRUTHS” cont.

5. EU DIRECTIVE 13.2.1975 “restriction of use of natural gas in power stations” EU DIRECTIVE 13.2.1975 “restriction of use of natural gas in power stations” Whereas: Natural gas quantities available are limited Natural gas should be reserved for “premium” application Natural gas should be reserved for “premium” application

6. EU DIRECTIVE 13.2.1975 “restriction of use of natural gas in power stations” EU DIRECTIVE 13.2.1975 “restriction of use of natural gas in power stations” Now therefore: “... new contracts.., and construction of new power stations using natural gas must be subject to prior authorization... “... new contracts.., and construction of new power stations using natural gas must be subject to prior authorization...... member states shall encourage cancellation of existing contracts for supply to power plants...”... member states shall encourage cancellation of existing contracts for supply to power plants...”

7. 3. Some FACTS

8. EU DIRECTIVE 18.3.1991  “.. whereas natural gas has specific advantages for the production of electricity in terms of limiting emissions of pollutants .. whereas technological advantages have enabled natural gas to be used for electricity generation having advantages both of lower capital and operating costs and greater efficiency compared with units using other fuels.. .. in view of the current developments on the gas market the restriction should not be retained..”

9. GRONINGEN GAS FIELD (Netherlands) remaining reserves cumulative production Source: Ministry of Economic Affairs, Netherlands 0 500 1000 1500 2000 2500 3000 7476788082848688909294 1974 2000

10. POWER GENERATION IN UK - natural gas- BCM/YR 0 5 10 15 20 25 199019921994199619982000 19902000 0 25

11. WORLD ENERGY RESERVES - natural gas vs oil - oil natural gas Source: BP, World Energy Review 2004 0 20 40 60 80 100 120 140 69717375777981838587899193

12. WORLD REMAINING GAS RESERVES Remaining years of production Source: BP, World Energy Review 2004 0 10 20 30 40 50 60 70 6870727476788082848688909294 70 1970 2003 R/P oil = 40 years

13. 4. WHY ARE WE OFTEN WRONG?  “Right forces, wrong model” Environment Economic growth Market Reserve base Technology Regulatory framework Natural gas industry

14. UNDERESTIMATE 1)Power of technology 2) Power of the market 3) Power of the environment 4)Dynamics when forces meet

15. THE POWER OF TECHNOLOGY - drilling of wells- 3,557,5 0 10 20 30 40 50 60 Cost pr. m. 1000 $.$. 1985 1990 1995 Horizontal length km Cost pr m Horizontal length km 1985 1995 10

16. THE POWER OF TECHNOLOGY - gas turbine - 1965 1980 2000 Efficiency % 0 20304050 Source: GE Cost per kW 50

17. UK gas industry – new supplies => new dynamics – new products UK electricity industry: natural gas substitutes coal Telecom Airline industry Interaction between markets and technology can reshape industries THE POWER OF THE MARKET deregulation

18. THE POWER OF ENVIRONMENT CO2-emissions in electricity generation kg/MWh 0 200 400 600 800 Coal gas coal

19. 5. THE ENVIRONMENTAL CHALLENGE “ How to combine the natural gas potential with global warming challenges?”

20. November 26, 2007 Econ PowerPoint presentation template WORLD CO2-EMISSIONS 1000mt 0 10 20 29 19942010 22 29 27 oil gas coal Source: IEA coal gas oil 19942010 22 29

21. KYOTO AGREEMENT 1. CO2-emission has a cost 2. Cost effective solutions

22. ENERGY CONSUMPTION VS ELECTRICITY CONSUMPTION - OECD - Electricity Energy Index 1971 2002 0 0,5 1 1,5 2

23. oil natural gas coal hydro nuclear 1. Stabilize/reduce energy consumption 2. Increase natural gas market share 3. Long term solutions for power generation -gas-nuclear -carbon capture and storage for coal THE ENVIRONMENTAL CHALLENGE