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Irina Slav

Irina Slav

Irina is a writer for the U.S.-based Divergente LLC consulting firm with over a decade of experience writing on the oil and gas industry.

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What Will Follow The Age Of Oil?

LNG carrier

U.S. natural gas production will increase by 10 percent this year alone and by as much as 60 percent by 2037, a new report from IHS Markit has forecast. The market research company is extremely upbeat about U.S. gas because of the shale gas revolution, seeing the country becoming a leading LNG exporter thanks to this revolution as well.

Besides production, IHS analysts also raised their estimates of gas supply in the United States that is economical at prices below the US$4 per MMBtu Henry Hub benchmark price—from 900 trillion cubic feet in 2010 to 1,250 trillion cubic feet. Thanks to this consistent cost decline, IHS expects natural gas to come to account for almost half of power generation in the country by 2040, from about 42 percent today.

To date, the U.S. produces around 81 billion cubic feet of natural gas daily. That’s up from 50 billion cubic feet before the shale boom, but if IHS estimates are correct, the daily average will expand to 118 billion cubic feet by 2037.

That’s good news for the power generation sector where coal and nuclear plants are being retired at a faster pace now that there is so much cheap gas around. Moody’s earlier this month estimated that growing gas production will make it possible to offset the loss of 35 GW of power generation capacity from plant retirements over the next five years. Sure, some renewable installation additions will help, too, but gas-fired plants will be the dominant alternative to coal and nuclear.

Since the United States cannot consume all this gas, a lot more of it will go to international markets, with IHS expecting the daily average LNG export rate in five years at a minimum of 10 billion cubic feet natural gas equivalent. That’s up from an estimated 3 billion cubic feet this year and 1.9 billion cubic feet last year. Related: The Permian Faces Shut Ins Due To Oil Pipeline Shortage

There might be a temporary problem with gas exports in the near term as a result of the tariff match between Washington and Beijing, though. Beijing threatened it would respond to the latest tariff round announced by Washington with the introduction of its own tariffs on U.S. petroleum, gas, and coal imports. Shale producers have warned that this will have negative consequences for all energy exports since China is one of the biggest export markets for the industry.

Besides exports, another growth industry for the new gas revolution will be petrochemicals. IHS estimates that this revolution will drive capital investments of more than US$120 billion over the period from 2012 to 2020 into expanding petrochemicals capacity.

Natural gas is finding its way into the transport and logistics sector. Though not popular as a fuel for vehicles—at least compared with gasoline—gas is becoming attractive. Earlier this month, UPS said it will spend US$130 million on the acquisition of a fleet of 730 vehicles running on compressed natural gas and on building five CNG fueling stations.

The shale boom made natural gas abundant and cheap, and if IHS is right, it will only increase in abundance and decrease in cost in the future. While this may not be too good for producers’ bottom lines, it’s good for pretty much all other industries. We might see the gas age replace the oil age within our lifetimes.

By Irina Slav for Oilprice.com

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  • Ronald C Wagner on June 21 2018 said:
    Great article Irina! I would love to see trucking go to natural gas, especially in polluted areas. It will prove to be cheaper and the trucks will last longer.
  • Mamdouh G Salameh on June 22 2018 said:
    It is much too early to talk about a post-oil era. Oil will be with us through the 21st century and far beyond. A post-oil era is a myth as I argued strongly and convincingly in a research paper published by the United States Association for Energy Economics (USAEE) on the 8th of December 2016 (USAEE paper No: 16-290).

    Since Edwin Drake drilled one of the world’s first commercial oil wells in Titusville, Pennsylvania in 1859, oil has been the lifeblood of the industrial world’s progress and standard of living. Innumerable everyday products – from pharmaceuticals to computers- depend on oil and its refining into complex chemicals and plastics. Modern industrial farming, which feeds much of the world, would grind to a halt if it were deprived of diesel-powered tractors, oil-and gas-based fertilizers to grow and harvest crops and the fossil fuels to process, package and ship food worldwide to feed a world population that has skyrocketed from 1.5 billion at the start of the oil age to 7 billion now.

    It is very doubtful that an alternative as versatile and practicable as oil, particularly in transport, could totally replace oil in the next 100 years and beyond.

    What will change is some aspects of the multi-uses of oil in transport, electricity generation and water desalination which will eventually be mostly powered by solar energy. However, oil will continue to be used extensively in the global petrochemical industry and other industries and outlets from pharmaceuticals to plastics, aviation and computers to agriculture and also in transport in most of the developing countries. Oil will continue to reign supreme throughout the 21st century and far beyond.

    And while there are many alternatives to oil in electricity generation such as natural gas, nuclear energy, coal, solar, hydro, geothermal energy and wind, the alternatives to oil in transport are virtually limited to electric vehicles (EVs) and hybrid cars, hydrogen fuel cell cars (FCVs), LNG-driven and CNG-driven vehicles all of which can never replace oil in transport during the 21st century and far beyond.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London
  • Darryl Scheck on June 22 2018 said:
    "Turmoil."
  • Lee James on June 22 2018 said:
    A few defend the coal age. Many more defend the oil age. It's often implied that switching over to one of the newer ages is almost, like instant.

    We won't move away from oil instantly, but the direction that we need to move is clear. Oil is next to coal in pollution. Oil surpasses coal considerably in its contribution to undermining world peace. Folks go to war over oil, block shipping lanes, and often use oil revenue to buy more armaments than they do peaceful goods.

    Gas is a good candidate for our next age. We just need to be honest about the cost and effects of gas leakage during extraction and transport to the end-user.

    We're often reminded that the stone age did not end because we ran out of stones. I pave my driveway exclusively with rocks.

    We can somewhat choose our energy age. All things considered, like the welfare of our grand kids, what should we have as our energy age?

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