Economy & Business

The Key Global Energy Trend Isn’t GND, It’s LNG

An employee works on the production line of tanks for liquefied natural gas at an energy equipment company in China, March 14, 2019. (Stringer/Reuters)
Renewables get the press, but natural gas is growing much faster.

While the Green New Deal continues to dominate energy discussions in the United States, the rest of the world continues to rely on coal, oil, and natural gas. And of those three, according to a report released Tuesday by the International Energy Agency, natural-gas consumption grew faster last year than any other form of energy, including renewables. That jump in global gas use reflects the soaring growth in U.S. production and exports of that same fuel.

Much of the media attention to the new IEA report focused on the increase in global carbon dioxide emissions, which rose by 1.7 percent last year. The IEA said the increase was due to “higher energy demand propelled by a global economy that expanded by 3.7 percent in 2018.” The report also noted the continuing growth in renewables, which increased by 4 percent.

Renewables such as wind and solar get lots of positive press. But last year renewables were eclipsed by the growth in global gas use, which jumped by 4.6 percent. At that rate, global gas demand could double within the next 16 years or so. The good news about the growth in global gas demand is that it is helping displace coal and liquid fuels for electricity generation — a change that, in turn, is helping reduce air pollution and greenhouse-gas emissions. During combustion, gas emits almost zero sulfur dioxide, and it produces about half as much carbon dioxide as coal and about 30 percent less than diesel fuel or fuel oil.

One of the main drivers of the surge in global gas use is the shale revolution. States such as Texas, Pennsylvania, Ohio, and Louisiana are all producing record quantities of natural gas. Indeed, the growth in domestic gas production has been nothing short of astonishing. In 2005, U.S. gas production was about 47 billion cubic feet per day. This year, U.S. gas production will average about 90 billion cubic feet per day. That’s an increase of 91 percent in just 14 years.

To put that in perspective, consider this: Since 2005, just the increase in U.S. natural gas production is equal to two times Iran’s natural-gas production, or four times Saudi Arabia’s.

The surge in shale-gas production has transformed both the domestic and the international gas businesses. Domestically, coal-fired power plants are being rapidly replaced by gas-fired ones. Between 2000 and 2017, the amount of U.S. electricity generated by gas-fired power plants more than doubled, while the amount produced from coal fell by nearly 40 percent.

The shale revolution has also made the U.S. a pivotal player in the global liquefied-natural-gas (LNG) business. At the end of 2018, the U.S. was exporting about 4 billion cubic feet of LNG per day. Only Australia and Qatar currently have more LNG export capacity than the U.S., and if all the planned LNG facilities are approved, the U.S. will soon be the world’s biggest LNG exporter. By mid-2020, the Energy Information Administration expects U.S. LNG export capacity will reach 10.6 billion cubic feet per day. Thus, within a year or so, U.S. LNG exports could be nearly equivalent to the entire gas output of Norway, Europe’s biggest single gas producer.

In 2018, the U.S. exported LNG to 30 different countries, including Kuwait and the United Arab Emirates, both of which are major oil producers. It’s an open secret in Houston that Saudi Arabia, the world’s biggest oil producer, is trying to secure a long-term LNG contract with U.S. suppliers. Doing so would allow the Saudis to reduce the amount of oil they are using to generate electricity and replace it with lower-cost LNG from the U.S.

To be sure, Tuesday’s IEA report included other important facts, including the news that global nuclear production grew by 3.3 percent last year due to new reactors starting up in China and the restart of four reactors in Japan. But the key takeaway from the report is that countries all over the world are continuing to pursue economic growth and are using the lowest-cost fuels they can find to fuel that growth. Renewable energy may get the headlines, but the IEA report clearly shows that natural gas — and in particular, low-cost natural gas from the U.S. — is playing an increasingly important role in fueling that growth.

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