Taking Advantage of America’s Natural Gas Windfall

TRENDS eMAGAZINE

 Thanks to new extraction technologies, the nation’s supply of recoverable natural gas is now at its highest level in history. 

According to recent estimates from the Potential Gas Committee (PCG), there is now 2,384 trillion cubic feet of recoverable natural gas in the United States.  This is an increase of 486 trillion cubic feet, or 26 percent, from the 2010 estimate.¹  The PCG is a nonprofit organization of energy experts hosted by the Colorado School of Mines that has been releasing reports on the nation’s natural gas supply for nearly 50 years.

 Why has the estimate increased so dramatically?  As PGC Director John Curtis explains, “Our knowledge of the geological endowment of technically recoverable gas continues to improve with each assessment.  Furthermore, new and advanced exploration, well drilling, and completion and stimulation technologies are allowing us increasingly better delineation of and access to domestic gas resources—especially ‘unconventional’ gas—which, not all that long ago, were considered impractical or uneconomical to pursue.”

In other words, it’s becoming easier to find, extract, transport, store, and use natural gas than it was just three years ago.

The PGC rates the Atlantic area, including the Marcellus Shale formation, as the area with the greatest abundance of natural gas, with an estimated 741,320 billion cubic feet.  The second-richest area is the Gulf Coast region, including part of Texas, all of Louisiana, and much of the Gulf, with an estimated 521,030 billion cubic feet of natural gas.

The PGC didn’t include the Department of Energy’s estimate of 304.6 trillion cubic feet of proved dry-gas reserves.  When those are considered, the U.S. boasts a total available future supply of 2.7 quadrillion cubic feet of natural gas.  To put that in perspective, the nation currently uses about 25 trillion cubic feet per year.²

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According to Erica Bowman, chief economist for America’s Natural Gas Alliance, “No other energy source has the potential to improve air quality, boost our economy, and add to our nation’s energy security on such a large scale.  The Potential Gas Committee’s report offers further confirmation that our nation has a vast supply of clean and affordable natural gas, and we ought to be taking greater advantage of its potential in power generation, industrial applications, transportation, and exports.”

As improvements in hydraulic fracturing technology have lowered extraction costs, natural gas prices have dropped.  According to data on gas usage and pricing information from the Energy Information Administration, Americans of all income levels collectively saved $357 billion due to reductions in natural gas prices from 2009 to 2012.³  And that’s just the beginning.

The challenge now is to exploit the enormous benefits of using natural gas to power our vehicles, generate electricity, manufacture plastics, create the heat needed for industrial processes, and more, in order to transform and energize our economy.   

About 66,000 Americans are already using compressed natural gas to fuel their cars, according to the Department of Energy.  Those drivers can fill their cars at the 605 natural gas stations that charge the equivalent of $1.00 to $1.40 per gallon.  Or, even more conveniently, they can top off their tanks at home, once they’ve installed a natural gas home refueling unit.

According to a Reuters report, an Arizona couple who uses a home refueling unit pays the equivalent of $0.65 per gallon.  So, instead of spending $160 per month on gasoline for the 1,200 miles they drive their Honda Civic GX, the couple spends just $30 and fuels the car overnight, while they sleep.⁴

Obviously, those savings can quickly add up.  However, the high initial investment has kept most motorists from driving natural gas vehicles.  One obstacle is still the cost of cars that can run on natural gas; they typically cost about $10,000 more than the same vehicle fueled by gasoline. 

Another obstacle is the cost of installing the home refueling units.  The unit used by the Arizona couple is only sold by an Italian company called BRC Fuelmaker and costs about $4,500.  Installation adds another $1,500.  In the Arizona case, it will take 46 months before the home refueling unit will pay for itself in lower fuel costs.  That explains why BRC Fuelmaker has only sold 13,000 units in the U.S.

However, several companies are now developing cheaper home refueling systems.  Among the powerful entrants to this market are General Electric, Whirlpool, Eaton, and others attracted by the low cost of natural gas and an expected boom in demand for cars that burn it. 

In addition to the lower fuel costs compared to conventional vehicles, cars that run on natural gas have two advantages over electric cars: 

1.                 It takes less time to fill a fuel tank with natural gas than it does to charge an electric car.

2.                 Natural gas cars can travel twice as far after refueling as the typical electric car: about 200 miles per tank.

That’s just the first generation of natural gas cars.  Innovative new designs are now being perfected at R&D facilities around the world.

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For example, researchers at ETH Zurich have redesigned the conventional diesel engine of a Volkswagen Golf to run on 90 percent natural gas.  As reported in the journal Energies, instead of using a spark plug for ignition as natural gas engines do, the engine is ignited with a small amount of diesel fuel injected directly into the cylinder.⁵  This allows the engine to achieve a highly efficient combustion with a maximum efficiency of 39.6 percent.  And the engine emits less than half the carbon dioxide of a regular gasoline or diesel engine, while achieving fuel economy in the VW Golf equivalent to 98 miles per gallon.

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Just as natural gas will replace gasoline in America’s trucks and cars, other developments strongly suggest that natural gas will replace coal in fueling the power plants that light our homes and businesses. 

One factor is a regulatory change:  The EPA has proposed new, stricter air-quality standards for sulfur dioxide, particulate matter, nitrogen oxide, and mercury.  In terms of all those metrics, natural gas burns far cleaner than coal.

If the EPA regulations are enforced after court challenges, a Duke University study published in Environmental Science & Technology, estimates that about two-thirds of the nation’s coal-fired power plants would become at least as expensive to run as plants powered by natural gas.⁶  This would make natural gas-fired plants the logical alternative when utilities add base-load capacity.

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Lincoln F. Pratson, a Duke professor of earth and ocean sciences, explains, “Because of the cost of upgrading plants to meet the EPA’s pending emissions regulations and its stricter enforcement of current regulations, natural gas plants would become cost-competitive with a majority of coal plants—even if natural gas becomes more than four times as expensive as coal.  Most natural gas plants typically produce only one emission—nitrogen oxide—that is in excess of the proposed new EPA thresholds, but many coal plants may exceed all of the thresholds, making it more expensive for them to come into compliance.”

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Another factor in the shift from coal to natural gas in power plants is a technological change:  Researchers have discovered a faster way to convert natural gas into energy, while capturing the carbon dioxide.

Fanxing Li, an assistant professor of chemical and bio-molecular engineering at North Carolina State University, co-authored a paper on the research in ACS Sustainable Chemistry & Engineering where he asserts; “This could make power generation from natural gas both cleaner and more efficient.”⁷

The breakthrough is based on a process known as chemical looping, in which a material called an “oxygen carrier” is put in contact with natural gas.  As the oxygen atoms in the oxygen carrier interact with the natural gas, the result is combustion, which produces energy.

Li’s team has developed a new type of oxygen carrier that includes a “mixed ionic-electronic conductor,” which shuttles oxygen atoms into the natural gas very efficiently—making the process up to 70 times faster.  This material is held in a nanoscale matrix with iron-oxide rust; the rust serves as the source of oxygen that the “mixed ionic-electronic conductor” shuttles out into the natural gas.

In addition to energy, the combustion process produces water vapor and carbon dioxide.  By condensing out the water vapor, researchers are able to create a stream of concentrated carbon dioxide to be captured for sequestration.

Another potential windfall coming from the abundance of super-cheap natural gas is in the production of industrial chemicals and plastics.  Currently, petroleum isn’t used just to make fuel; it’s also used to make ethylene, propylene, and other building blocks used in the production of a wide range of other chemicals.

For example, the world uses 130 million kilograms of ethylene each year.  It is an intermediate in the production of a wide range of materials, including chemicals, polymers, and fuels, which are ultimately transformed into films, surfactants, detergents, antifreeze, textiles, and many other products.  Today, this industry is entirely dependent on high-priced petroleum.  Consequently, there is a powerful incentive to find a way to convert natural gas into ethylene.

The problem is that methane, the principal component of natural gas, is inert and requires high temperatures to activate its strong chemical bonds.  Then, removing this excess heat is both expensive and wastes a lot of energy. 

So far, chemists haven’t been able to solve the puzzle of how to transform methane into chemical intermediates. 

However, a scientist in the Netherlands, Tymen Tiemersma, has found a solution to the problem of the excess heat needed to produce ethylene from natural gas.  Tiemersma realized that natural gas is also the raw material for syngas, a mixture of carbon monoxide and hydrogen, and the process requires a lot of heat.  So he combined the two processes by using a catalyst that makes it possible to convert one substance into another. 

The production of ethylene generates extreme heat, which is needed for the production of syngas, while the syngas absorbs the heat from the production of ethylene, avoiding the need for this process to be cooled down.

Using the new catalyst, Tiemersma is confident that natural gas can be cost-effectively converted into ethylene for the production of chemicals and plastics.

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Another potential solution comes from Matthew Neurock, a chemical engineering professor in the University of Virginia’s School of Engineering and Applied Science.  Neurock has been working with colleagues at Northwestern University to develop new techniques and catalytic materials to activate methane for the production of ethylene.  The team recently published a paper in the journal Nature Chemistry in which they announced that sulfur can be used together with novel sulfide catalysts to convert methane to ethylene.⁸  If this proves practical in the laboratory, it could result in a huge leap forward in making natural gas a preferred chemical feedstock.

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Among the remaining obstacles to wider use of natural gas, both for domestic needs and as an export, are the challenges of transporting and storing it.  But now, a novel approach developed by chemists at the University of Liverpool may solve both problems by converting the gas into apowder.⁹

The Liverpool scientists developed a material made out of a mixture of silica and water that can soak up large quantities of methane molecules.  The fine white powder can be easily transported or used as a vehicle fuel. 

According to Liverpool Professor Andy Cooper, “We used a method to break water up into tiny droplets to increase the surface area in contact with the gas.  We did this by mixing water with a special form of silica—a similar material to sand—which stops the water droplets from coalescing.  This ‘dry water’ powder soaks up large quantities of methane quite rapidly at around water’s normal freezing point.”  “Dry water” is expected to have industrial applications because it permits methane to be stored more conveniently and used to power clean vehicles without the need for large pressurized tanks.

Given the important trend toward exploiting cheap abundant natural gas across the economy, we offer the following forecasts:

First, as new home refueling units reach the market, adoption of natural gas vehicles will soar. 

Currently, sales of natural gas cars trail electric cars, 66,000 to 150,000.  The big difference is that electric car owners pay just $1,000 for a home charging unit, compared to $4,500 for the BRC natural gas refueling unit.  As competitors like GE and Whirlpool enter the market with cheaper offerings, demand will increase.  For example, GE was given a $1.8 million government grant to develop its system, which will lower the temperature of the natural gas to minus-50 degrees Celsius to remove water and eliminate the need for compression.  The company plans to introduce its model by 2015, at a price of just $500.¹⁰

Second, another promising opportunity lies in converting business vehicles to natural gas.  

According to the Wall Street Journal, about 5 percent of all heavy-duty trucks sold next year will run on natural gas; that’s a 500 percent increase from this year.¹¹  Companies are motivated to make the shift by the low cost of natural gas, which sells for about half the price of diesel fuel.  They’re also taking advantage of new heavy-duty truck engines that are starting to reach the market.  Last summer, Cummins Westport introduced a 12-liter natural gas engine, and in 2014, Volvo AB will offer a natural gas engine for its trucks.  Both engines will be designed for trucks that weigh up to 80,000 pounds.

Third, the shift from oil to natural gas will allow the U.S. to achieve energy independence. 

At the current consumption level of 25 trillion cubic feet per year, the U.S. has accessible supplies of natural gas to last at least 108 years.  Even if the increasing adoption of trucks and cars that run on natural gas causes demand to quadruple, current accessible supplies would last another 27 years, which is more than enough time to transition from fossil fuels to more advanced energy sources, such as nuclear fusion.  And that doesn’t even consider the likelihood that other sources of natural gas like undersea methane hydrates will be tapped, or that new techniques for extracting it will make more natural gas accessible.  This great news for Americans is a catastrophic development for the Russian and OPEC petroleum producers, which are likely to face political instability as their economies weaken.

Fourth, replacing coal with natural gas would reduce global warming.  

Power plants produce 40 percent of all carbon emissions in the U.S.  Yet, in 2009, carbon dioxide emissions from power generation dropped by nearly 9 percent.  According to researchers at the Harvard School of Engineering and Applied Sciences, the drop was the result of the new abundance of cheap natural gas.  As the researchers detailed in Environmental Science & Technology, coal-fired plants release twice as much carbon dioxide to generate 1 kilowatt-hour of electricity as do plants run on natural gas.¹²  As more of the nation’s electricity is generated by natural gas, emissions will fall further. 

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That’s also the conclusion of an analysis by Cornell Professor Lawrence M. Cathles, who explored three different future fuel consumption scenarios:  a status quo case in which energy generation capacity continues at its current pace with its current energy mix until the middle of the century; a gas substitution scenario, where natural gas replaces all coal power production and any new oil-powered facilities; and a low-carbon scenario, where all electricity generation is immediately switched to non-fossil fuel sources such as solar, wind, and nuclear.  As he explained in the journal Geochemistry Geophysics Geosystems, the gas substitution scenario would realize 40 percent of the reduction in global warming that could be achieved with a full switch to low-carbon fuel sources.¹³

Resource List:

1.                 Business Insider, April 9, 2013, “A New Estimate of U.S. Natural Gas Reserves Is the Highest in History,” by Rob Wile.  © 2013 by Business Insiders, Inc.  All rights reserved.       
http://www.businessinsider.com/estimate-of-recoverable-us-gas-reserves-2013-4-ixzz2jDjHRcd3

2.                 Fuel Fix, April 9, 2013, “U.S Recoverable Natural Gas Estimate Jumps 26 Percent,” by Jeannie Kever.  © 2013 by Hearst Communications, Inc.  All rights reserved.
http://fuelfix.com/blog/2013/04/09/estimates-of-recoverable-natural-gas-climb-26-percent/

3.                 Carpe Diem, December 5, 2013, “The U.S. Shale Revolution Is a Reminder of the Deep Pools of Ingenuity, Risk Taking, and Entrepreneurship in America,” by Mark J. Perry.  © 2013 by the American Enterprise Institute.  All rights reserved.     
http://www.aei-ideas.org/2013/10/the-us-shale-revolution-is-a-reminder-of-the-deep-pools-of-ingenuity-risk-taking-and-entrepreneurship-in-america/

4.                 Reuters, October 4, 2013, “Insight: Americans Eye Cheap Home Refueling for Natural Gas Cars,” by Edward McAllister.  © 2013 by Thomson Reuters.  All rights reserved.       
http://www.reuters.com/article/2013/10/04/us-naturalgas-home-refueling-insight-idUSBRE9930D120131004

5.                 Energies, July 2013, “Hybrid-Electric Vehicle with Natural Gas-Diesel Engine,” by Tobias Ott, Christopher Onder, and Lino Guzzella.  © 2013 by MDPI AG.  All rights reserved.       
http://www.mdpi.com/1996-1073/6/7/3571

6.                 Environmental Science & Technology, May 7, 2013, “Fuel Prices, Emission Standards, and Generation Costs for Coal vs Natural Gas Power Plants,” by Lincoln F. Pratson, Drew Haerer, and Dalia Patiño-Echeverri.  © 2013 by the American Chemical Society.  All rights reserved.   
http://pubs.acs.org/doi/abs/10.1021/es4001642?prevSearch=%5BContrib%3A+lincoln+f.+pratson%5D&searchHistoryKey=

7.                 Sustainable Chemistry & Engineering, March 4, 2013, “Iron Oxide with Facilitated O² Transport for Facile Fuel Oxidation and CO₂ Capture in a Chemical Looping Scheme,” by Nathan L. Galinsky, Yan Huang, Arya Shafiefarhood, and Fanxing Li.  © 2013 by the American Chemical Society.  All rights reserved.      
http://pubs.acs.org/doi/abs/10.1021/sc300177j

8.                 Nature Chemistry, February   2013, “Sulfur As a Selective ‘Soft’ Oxidant for Catalytic Methane Conversion Probed by Experiment and Theory,” by Qingjun Zhu, Staci L. Wegener, Chao Xie, Obioma Uche, Matthew Neurock, and Tobin J. Marks.  © 2013 by Nature Publishing Group, a division of Macmillan Publishers Limited.  All rights reserved.
http://www.nature.com/nchem/journal/v5/n2/abs/nchem.1527.html

9.                 For more information about transporting natural gas, visit the University of Liverpool website at:  
http://www.liv.ac.uk/researchintelligence/issue37/methane.htm

10.             Reuters, October 4, 2013, “Insight: Americans Eye Cheap Home Refueling for Natural Gas Cars,” by Edward McAllister.  © 2013 by Thomson Reuters.  All rights reserved.       
http://www.reuters.com/article/2013/10/04/us-naturalgas-home-refueling-insight-idUSBRE9930D120131004

11.             The Wall Street Journal, October 29, 2013, “Truckers Tap into Gas Boom,” by Mike Ramsey.  © 2013 by Dow Jones & Company, Inc.  All rights reserved.     
http://online.wsj.com/news/articles/SB10001424052702304200804579165780477330844

12.             Environmental Science & Technology, March 6, 2012, “Implications of the Recent Reductions in Natural Gas Prices for Emissions of CO₂ from the U.S. Power Sector,” by Xi Lu, Jackson Salovaara, and Michael B. McElroy.  © 2012 by the American Chemical Society.  All rights reserved.
http://pubs.acs.org/doi/abs/10.1021/es203750k?prevSearch=%5BContrib%3A+xi+lu%5D&searchHistoryKey=

13.             Geochemistry, Geophysics, Geosystems, June 2012, “Assessing the Greenhouse Impact of Natural Gas,” by L.M. Cathles.  © 2012 by John Wiley & Sons, Inc.  All rights reserved.       
http://onlinelibrary.wiley.com/doi/10.1029/2012GC004032/abstract