Growth in Natural Gas

The OECD report, World Energy Outlook 2011, was released just a week ago.  It makes clear not only the potential that natural gas has as a global source of energy, but it clarifies its increasing potential role in utilities as well as in industries such as steel that have depended primarily on coal.  The Outlook 2011 observed, “Natural gas is projected to play an increasingly important role in the global energy economy. It is the only fossil fuel for which demand rises in all three Outlook scenarios. In the New Policies Scenario, world demand increases to 4.75 tcm in 2035 at an average rate of 1.7% per year.”

The OECD Outlook 2011 examines by regional sector.  In light of the especially significant, anticipated growth in energy demand from China, it is worth noting the likely impact of this single, developing country on demand for natural gas.  China had announced in March its anticipated growth in dependency on natural gas with the release of its 12th Five Year Plan for 2011 – 2015.  As a part of China’s stated commitment to the Copenhagen pledge, the Plan included natural gas along with nuclear and renewables as energy sources for which it foresees an increasing dependency.

Related to China’s Copenhagen pledge, this blog along with others has observed that natural gas is an increasingly important transition fuel.  Very substantial global increases in energy demand will continue to make fossil fuels a major part of the energy mix.  With some possibility of carbon regulation, the advantages of natural gas grow, and as coal becomes more expensive, the potential for natural gas as a substitute fossil fuel is evident.

Commenting on China’s anticipated growth in dependency on natural gas, the World Energy Outlook 2011 observed, “The share of natural gas in total generation increases from a mere 2% in 2009 to 8% in 2035. . . .”. The OECD outlook also foresees growing dependency  on natural gas in the U.S.  While part of this forecast is dependent on some form of carbon regulation’s being introduced, Outlook 2011 observes that prices of natural gas will be a primary driver of increased demand.  Of course, prices will be held low by the abundance of U.S. natural gas supplies from shale beds.

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