The age of cheap natural gas in Asia is just getting started

Article by Roberto F. Aguilera, Adjunct Research Fellow at Curtin University, Australia and Marian Radetzki, Professor of Economics at Luleå University of Technology, Sweden.

 

This is part one of a two-part article – Much of the world’s future energy consumption growth will come from Asia. For the past several decades, the region has been fuelled predominantly by coal and to a lesser extent oil. Going forward, the importance of natural gas is expected to increase substantially, for it offers several advantages compared to other sources. Apart from being abundant and affordable, gas emits one-half to one-third the emissions of coal when burned.

Despite the benefits, some gas-producing nations have expressed concerns that demand in Asia will not be sufficiently large to accommodate all possible gas supply sources. On the other side, consuming nations in the region worry about insufficient gas availability, particularly over the longer term.

But we believe demand will thrive and be sufficiently large to accommodate vast supplies from diverse places like North America, the Middle East, Russia, Africa, Australia and Asia itself. An important policy implication is that gas producing and consuming nations should benefit from promoting gas trade and not be overly influenced by temporary episodes of surplus or shortage. The age of gas will be achieved thanks to abundant gas and LNG supply, and rising consumption. We briefly discuss unconventional gas prospects in this part.

The shale revolution: Unconventional gas – e.g. from shale and tight formations – will likely play a major role in satisfying growing future energy requirements in Asia. A study published by the US Energy Information Administration in 2013 estimates a global recoverable shale gas total above 7,000 trillion cubic feet, which is similar to current proved gas reserves. The recoverable shale gas resources are widely spread, with China holding the greatest endowment (around 15% of the total).

As indicated in our recent book, The Price of Oil, successful developers around the world could reap benefits similar to those experienced by the US in its progress with unconventional gas. The advantages afforded by the shale revolution in the US have been so strong that its international spread is inevitable. Most of the technology employed is not proprietary and so can be transferred across borders.

For development to take place, it will be essential to overcome environmental impacts associated with the extraction methods. Sharpened regulation will help; however, there is also a risk that overly demanding regulatory regimes, caused by alarmist environmental groups and supported by unreflected, equally alarmist media reporting, could impose costs that hinder the shale revolution in the future.

This is part one of a two-part article, the second half will be published shortly. Subscribe to our  Newsletter & Follow us @GasInteract.

Join the Conversation:  Do you agree with Roberto and Marian? Will the age of gas be achieved thanks to abundant gas and LNG supply, and rising consumption? Share your views below.

Roberto F. Aguilera, Adjunct Research Fellow at Curtin University, Australia (left) & Marian Radetzki, Professor of Economics at Luleå University of Technology, Sweden (right). Their new book, The Price of Oil, is published by Cambridge University Press.

 

 

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  • Freddie Nerk

    Why are these guys playing down valid environmental concerns about fracking? It is well documented that areas where extensive fracking has occured are experiencing a huge increase in earthquakes and ground water contamination. Sweeping these under the carpet is not helpful. As economists, they should factor environmental impact into their cost. Would gas look cheap then? 60 years ago, people were saying the same about nuclear – cheap and abundant!

  • Allan Kirk

    Just last week reports were coming in about 4 giant tailings ponds in BC leaking—residue from fracking operations in BC. Even more serious, large outflows from river banks, way below grade and at a time of low rainfall were reported to have caused banks to collapse, sending tons of sediment into the river. Tests confirmed abnormally high levels of heavy metals downstream. These toxic and environmentally destructive outflows are the result of fracking.

  • Roberto

    Many of the concerns voiced by yourself and others are addressed in some detail in the book, but could not be in the short article to which you are reacting.

    For example, there is a chapter on environmental issues arising from fracking, which attempts to bring a better understanding to the concerns – most of which relate to intensive water use, contamination of aquifers, emission of GHGs and induced earthquakes. In short, technology has a major role to play in alleviating the problems. Producers have the incentive to improve the associated technologies (reduce the external costs) when efficient and enforceable regulation is applied.

    We must emphasize this is an infant industry with a number of infant ailments, and so far inadequately regulated. We think most of the infant ailments will be healed as the industry matures and as regulators get into the task.

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