The Future of Natural Gas

MITeiMIT Energy Initiative
The Future of Natural Gas

Report Launch Coverage:
The Future of Natural Gas
06/09/11


The panelists discuss key points and take questions from the audience.

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The Future of Natural Gas is the fourth in a series of MIT multidisciplinary reports examining the role of various energy sources that may be important for meeting future demand under carbon dioxide emissions constraints. In each case, we explore the steps needed to enable competitiveness in a future marketplace conditioned by a CO2 emissions price. Often overlooked in past debates about the future of energy in the U.S., natural gas is finding its place at the heart of the energy discussion. Natural gas is a major fuel for multiple end uses — electricity, industry, heating — and is increasingly discussed as a potential pathway to reduced oil dependence for transportation. In addition, the realization over the last few years that the producible unconventional gas resource in the U.S. is very large has intensified the discussion about natural gas as a "bridge" to a low-carbon future.

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Report
Executive Summary
Abstract
Foreword and Acknowledgements
Study Participants and Advisory Committee
Chapter 1: Overview and conclusions
Appendix 1A
Chapter 2: Supply
Appendix 2 A
Appendix 2 B
Appendix 2 C
Appendix 2 D
Appendix 2 E
Supplemental Paper 2.1: "Natural Gas Resource Assessment Methodologies and Background Material on Resource Assessments, Globally and in U.S.," Qudsia Ejaz
Supplemental Paper 2.2: "Background Material on Gas Supply in Canada, Russia, Qatar and Iran," Qudsia Ejaz
Supplemental Paper 2.3: "Technology in Unconventional Gas Resources," Carolyn Seto
Supplemental Paper 2.4: "Methane Hydrates Supplementary Material," Carolyn Ruppel
Chapter 3: US Gas Production, Use and Trade: Potential Futures
Appendices 3 A & B
Supplementary Paper SP 3.1: "Russia's Natural Gas Export Potential up to 2050"
Chapter 4: Electric Power Generation
Appendix 4
Chapter 5: Demand
Appendix 5 A
Appendix 5 B
Appendix 5 C
Appendix 5 D
Chapter 6: Infrastructure
Chapter 7: Markets and Geopolitics
Chapter 8: Analysis, Research, Development and Demonstration
Appendix 8 A
Appendix 8 B
INTRODUCTION

Despite its vital importance to the national economy, natural gas has often been overlooked, or at best taken for granted, in the debate about the future of energy in the U.S. Over the past two or three years, this has started to change, and natural gas is finding its place at the heart of the energy discussion.

There are a number of reasons for this shift. The recent emergence of substantial new sup- plies of natural gas in the U.S., primarily as a result of the remarkable speed and scale of shale gas development, has heightened awareness of natural gas as a key component of indigenous energy supply and lowered prices well below recent expectations. Instead of the anticipated growth of natural gas imports, the scale of domes- tic production has led producers to seek new markets for natural gas, such as an expanded role in transportation. Most importantly for this study, there has been a growing recognition that the low carbon content of natural gas relative to other fossil fuels could allow it to play a signifi- cant role in reducing carbon dioxide (CO2) emis- sions, acting as a "bridge" to a low-carbon future.

Within this context, the MIT study of The Future of Natural Gas seeks to inform the discussion around natural gas by addressing a fundamental question: what is the role of natural gas in a carbon-constrained economy?

In exploring this question, we seek to improve general understanding of natural gas, and examine a number of specific issues. How much natural gas is there in the world, how expensive is it to develop, and at what rate can it be produced? We start from a global perspective, and then look in detail at U.S. natural gas resources, paying particular attention to the extent and cost of shale gas resources, and whether these sup- plies can be developed and produced in an environmentally sound manner.

Having explored supply volumes and costs, we use integrated models to examine the role that natural gas could play in the energy system under different carbon-constraining mechanisms or policies. It is important to recognize that the study does not set out to make predictions or forecasts of the likelihood or direction of CO2 policy in the U.S. Rather, we examine a number of different scenarios and explore their possible impacts on the future of natural gas supply and demand.

Natural gas is important in many sectors of the economy — for electricity generation, as an industrial heat source and chemical feedstock, and for water and space heating in residential and commercial buildings. Natural gas competes directly with other energy inputs in these sectors. But it is in the electric power sector — where natural gas competes with coal, nuclear, hydro, wind and solar — that inter-fuel competition is most intense. We have, therefore, explored in depth how natural gas performs in the electric power sector under different scenarios. We have also taken a close look at the critical interaction between intermittent forms of renewable energy, such as wind and solar, and gas-fired power as a reliable source of backup capacity.

We look at the drivers of natural gas use in the industrial, commercial and residential sectors, and examine the important question of whether natural gas, in one form or another, could be a viable and efficient substitute for gasoline or diesel in the transportation sector. We also examine the possible futures of global natural gas markets, and the geopolitical significance of the ever-expanding role of natural gas in the global economy. Finally, we make recommendations for research and development priorities and for the means by which public support should be provided.