The last decade has seen dramatic changes in the global gas market, because of the arrival of new supplies, challenges and technological solutions.
For instance, the global gas glut has encouraged new opportunities to occur in the transport, petrochemical and power generation sectors. In addition, advances in new technologies have created new opportunities, at various scales, for gas to work together with renewables in meeting the world’s power generation needs. This feature takes a look at some of these developments.
There Is a Dash for Gas
The shale gas revolution in the US, alongside increased output of LNG in Australia and Qatar combined to cause a supply glut, making gas widely affordable and accessible. In the US, investors are building at least eight such cracker and polyethylene plants, to capitalise on cheap shale gas. One such investor is Shell’s developing a new plant in Pennsylvania, USA. Whilst chemical giant INEOS is importing US ethanol, a derivative of shale gas, as a feedstock for facility in Grangemouth Scotland as well as other plants across Europe.
New Markets for Gas
The increasing availability of cheap gas, whether delivered by pipeline or by virtual gas systems in the form of LNG or CNG has opened new markets and increased market penetration for gas producers.
In the US, the increasing availability of cheaper shale gas has allowed to displace ‘King Coal’ in the power sector, pushing it into second place. Nationally, gas dominates with a market share of 33% against 30.4% for coal, according to the EIA. However, in particular states including New York and Virginia, the share of natural gas in power generation is even higher. Likewise, India is expected to increase imports of gas four-fold, as demand for power increases, with economic development.
Gas Working with Renewables
At grid level, the increasing amount of solar and wind power integrated into the system increases the need for gas peaker plants to compensate for times when the skies are cloudy and the strength of the wind is too low. A case in point is Germany, which still relies on gas power, although renewables supply nearly 100 percent of power needs, at times. In January 2017, wind and solar power failed to meet demand, as gas power plants had to step in.
Peaker plants are flexible and highly responsive, being able to ramp up power in response to fluctuations in both demand and supply, caused by renewables. Therefore, in many European countries including Belgium, France, and the UK we are seeing investment in new peaker plants capacity in order to balance grid supplies.
A Massachusetts-based National Bureau of Economic Research (NBER) report on Germany found that as a rule of thumb that 8 MW of backup capacity are required for any 10 MW of wind capacity added to the system.
At Industrial and Commercial Level
Gas is also proving useful for onsite power generation, supplied by piped or virtual gas solutions to industrial, commercial and public segments across the world. Examples of on-site heat and power plants supplied using piped gas include UPM Paper Mill in Plattling, Germany, the UK Oxford University Hospitals Project and at Sasol’s South African refinery. For instance, the Oxford Hospital project costing £14.7 million, promises to make annual savings of £460,000 a year on its energy bills, a sum sufficient to employ 13 nurses.
For customers, unconnected to a gas grid, such customers are using virtual gas solutions, delivered in LNG or CNG modes by truck. Such examples include the Aroostook Medical Center in New England, supplied with CNG by Xpress Natural Gas and the Renard diamond mine in Quebec’s Otish Mountains. The Renard mine is using LNG to run the power plant instead of diesel, and its operators expect to see operating cost reductions of between $8 million and $10 million per year over the initial 11 year mine life, representing a life of mine operating cost saving of $89 million.
Unconnected shale oil and gas
Flared associated gas in many oil fields is a problem, especially where pipeline networks are not available nearby to collect gas for delivery to markets. One innovative solution to these problems is by GE Oil & Gas and Ferus Natural Gas Fuels: the provision of a 'Last Mile Fuelling solution'. This technology and logistics solution collects previously uneconomic natural gas from a flare stack, oilfield production site, or from a remote pipeline, then compresses the gas and delivers it the final distance, or the "Last Mile," to provide fuel for transport, power and heating in local communities. In addition, rising associated gas supplies from the rich Permian oil play is being despatched in a virtual pipeline to Gulf of Mexico customers.
In Europe, the rise of renewables has caused gas power plants being underutilised, mothballed or even closed early in Europe, due to the priority given to renewables. Future growth in gas power generation will be in developing countries like India, South Africa, and China, rather in Europe. Even in the US, it is likely that a similar trend of zombie gas power plants is likely to develop, because of the increasing competitiveness of renewables and changes in the market demand due to automation, 3Dprinting and AI.
A case in point put forward at this year’s Flame conference 2017 by Dieter Helm – Fellow, New College Oxford – was that, “increasingly, industrial customers will only be interested in fixed-priced capacity contracts to power their machines, not buying energy on the spot markets.” In some countries, this would mean that gas would remain a base-load supplier of power generation, whilst in others, it would act as a facilitator of standby and or peak power. Though one thing is clear, small gas plants located across the grid are now the future, as they are much more bankable and responsive.