The Vail Global Energy Forum, March 1 to 3, was dominated by discussions of what Colorado Governor John Hickenlooper called “the unbelievable surfeit of natural gas.” Hickenlooper, along with many gas advocates, believes that the United States has enough economically-viable gas reserves to last a century.
One pay-off: old, inefficient coal plants are closing, cutting off their high carbon emissions. Oil-stocks financial analyst Tom Petrie predicts that by 2025, the American transportation sector will be driven largely by natural gas, either directly as a motor fuel or indirectly through electric batteries charged by natural gas power stations. “That will back us out of $1 million a day of oil imports,” he said, with profound benefits to the economy. In addition, he said, as natural gas replaces coal, the United States will gradually come to meet Kyoto Protocol goals. New geopolitical alliances will emerge, as Russian and Iranian gas supplant Saudi petroleum in the Chinese and Indian markets.
Other voices say that gas may be a bubble. Last year, with natural gas selling at $2.50 per thousand cubic feet, drilling companies lost money. A report published by the Post Carbon Institute this month suggests that the half-life of a typical well is about two years ― a typical shale-gas well production rate drops about 70 percent in the first year, and 50 percent each year thereafter. According to J. David Hughes, author of “Drill, Baby, Drill: Can Unconventional Fuels User in a New Era of Energy Abundance?”, maintaining today’s level production rate will cost about $42 billion a year to drill 7,000 new wells a year ― and in 2012 existing wells produced gas worth just $32.5 billion. (To download the Hughes report, go to http://www.postcarbon.org/drill-baby-drill/report.) The price has since risen to $3.50, and will have to go higher to keep shale-gas drilling profitable.
Jim Brown, president/western hemisphere at Halliburton, told the Vail audience that shale gas has increased proven U.S. gas reserves by 66 percent. Still, that’s finite resource, said Mark Zoback, professor of geophysics at Stanford. “If we do replace coal and oil with natural gas, the gas reserve comes down to about 30 years, not a century,” he said. “The short term is rosy, and we’re in a better position than we were five years ago. But it won’t last forever.”
The lesson: Gas is still a bridge fuel to a grid powered by large-scale renewable sources, and if fully exploited it’s a short bridge. The news this week that a Japanese research team has succeeded in extracting methane from an undersea methane hydrate formation suggests that the world may have enough natural gas to cook the atmosphere many times over.
That fact makes it even more urgent to drive the costs of wind, solar, geothermal and biofuels down below the cost of natural gas.