Tuesday, June 23, 2009

America is Gassy

Natural gas, that is. Methane. CH4.
Thanks to new drilling technologies that are unlocking substantial amounts of natural gas from shale rocks, the nation’s estimated gas reserves have surged by 35 percent, according to a study due for release on Thursday.

The report by the Potential Gas Committee, the authority on gas supplies, shows the United States holds far larger reserves than previously thought. The jump is the largest increase in the 44-year history of reports from the committee.

The finding raises the possibility that natural gas could emerge as a critical transition fuel that could help to battle global warming. For a given amount of heat energy, burning gas produces about half as much carbon dioxide, the main cause of global warming, as burning coal. (New York Times, June 17, 2009)
The Potential Gas Committee is a academic/industry group based out of the Colorado School of Mines. (Full disclosure, my employer, Southwestern Energy, is one of the sponsors of the Potential Gas Committee.) The article continues:
Estimated natural gas reserves rose to 2,074 trillion cubic feet in 2008, from 1,532 trillion cubic feet in 2006, when the last report was issued. This includes the proven reserves compiled by the Energy Department of 237 trillion cubic feet, as well as the sum of the nation’s probable, possible and speculative reserves.
The R-Squared energy blog asks the question--what if we replaced the gasoline used in this country with natural gas?
The U.S. currently consumes 390 million gallons of gasoline per day. (Source: EIA). A gallon of gasoline contains about 115,000 BTUs. (Source: EPA). The energy content of this much gasoline is equivalent to 45 trillion BTUs per day. The energy content of natural gas is about 1,000 BTUs per standard cubic foot (scf). Therefore, to replace all gasoline consumption would require 45 billion scf per day, or 16.4 trillion scf per year. Current U.S. natural gas consumption is 23 trillion scf per year (Source: EIA). Therefore, replacing all gasoline consumption with natural gas would require a total usage of 39.4 trillion scf per year, an increase in natural gas consumption of 71% over present usage.

Assuming for the sake of argument that the 2,074 trillion standard cubic feet cited in the study is accurate, that the "probable, possible and speculative reserves" eventually equate to actual reserves, and that the gas is economically recoverable, that is enough gas for 53 years of combined current natural gas consumption and gasoline consumption. If you assume that only the proven plus probable reserves are eventually recovered, the amount drops to about 1/3rd of the 2,074 trillion scf estimate, still enough to satisfy current natural gas consumption and replace all gasoline consumption for almost 20 years.
Pretty exciting, eh? Some of his commenters have expressed doubts about natural gas replacing gasoline--does it run an engine as well? Is Btu content a good measure for comparison? I am not enough of an engineer to answer that question. However, one of the primary problems with gasoline is that is can ignite at high temperatures even if there is no spark present. So in an internal combustion engine, gasoline might ignite before the cylinder is fully compressed and the spark-plug sparks. This is called autoignition or "knocking," and it reduces the efficiency of an engine and can damge it in the long run. The higher the octane-rating, the less knocking you get. A big part of the cost of gasoline is in the anti-knock additives that are mixed in. (See Oil 101 for a detailed explanation.)

Would auto-ignition be a problem with CNG engines? I don't think so--the autoignition temperature for gasoline is about 200 degrees Celsius while it is 540 degrees Celsius for natural gas. Or, to put it another way, gasoline has an octane rating (even with additives) of about 87 to 90, while natural gas has 120 octane (NGV Community).

But what about CO2? If we replace one hydrocarbon fuel for another, we don't do anything for the problem of greenhouse gasses, right? Natural gas produces about 117 lbs of CO2 per MMBtu. A gallon of gas produces about 20 lbs of CO2 (this seems crazy since a gallon of gas weighs just over 6 lbs, but remember that when gasoline burns, it uses oxygen from the air--which accounts for most of the additional weight of the CO2). In other words, producing 100,000 Btus from gasoline will produce 17.4 lbs of CO2 while producing the same Btus from natural gas will only produce 11.7 lbs of CO2. (Not to mention that burning gasoline produces other pollutants, like ground-level ozone.)

So from a purely green sense, natural gas would be a better fuel than gasoline.

R-Squared calculates the costs as well.
Natural gas is presently trading at about $4 per million (MM) BTU (although December 2009 is trading at almost $6). Oil is presently trading at $71/bbl, which equates to $12.24/MMBTU. Gasoline is presently trading at over $17/MMBTU. Thus, natural gas is a bargain relative to oil or gasoline. Incidentally, I just checked on seasoned wood and wood pellets, and they range from $8-$12/MMBTUs. So it is cheaper to heat your house with gas than with wood. I am not sure I would have guessed that.

While natural gas is a bargain relative to gasoline, converting a gasoline-powered vehicle to natural gas isn't cheap. According to this source, it can cost $12,500 to $22,500 to convert a gasoline-powered car to natural gas. Honda makes a compressed natural gas (CNG) vehicle, but according to this review in Car and Driver the premium over the gasoline version is $8780. A person would need to drive an awful lot to justify that premium. However, that's what fleets do. They drive a lot. The large price differential explains why fleets would be interested in running their vehicles on natural gas.
Also, one reason oil and gasoline are so expensive is that we need the latter to run our cars and the former to make the latter. The demand is very high. If we converted our cars to CNG, we'd have the same issue with natural gas. Natural gas would be more expensive and petroleum less (because we would be using it mainly for jet fuel, heating oil, resid oil, etc.).

But the main benefit of switching might be in terms of trade balance. In 2008, our trade deficit was over $128 billion dollars. Furthermore, we've only been positive one year (1991) since 1960. (Source BEA.) But we imported roughly $68 billion dollars worth of crude oil last year. (Source EIA.) So half our deficit could be wiped out--and the money that we shovel overseas to the various thugs, tyrants, and kleptocrats (not to mention the huge military expense of guaranteeing that supply)--could be kept here. And some of it put in the pockets of landowners who are lucky enough to live above gas shales, U.S. gas-field workers, U.S. gas producer employees (like me!), and U.S. gas company shareholders.

That sounds like a good deal, doesn't it?

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