Lately there is much talk of the surge in natural gas supplies, their falling prices, and predictions of greatly expanded use. Two key technologies, hydraulic fracturing (fracking) and horizontal drilling, have made accessible enormous quantities of an unconventional resource shale gas. The Energy Information Administration of the Department of Energy estimates technically recoverable shale gas resource at 827 trillion cubic feet (tcf), almost four times the proved reserves of natural gas of 245 tcf. There are also an estimated 1500 tcf of unproved conventional resources, and a good fraction of these may also become available at some pint in the future.
When expressed in CMO units (cubic mile of oil equivalents) the proved reserves, shale resource, and unproved resources are only 1.6, 5.4, and 9.8 CMO respectively, and it is clear that they can only make a modest contribution to the overall global energy scene.
The unleashing of natural gas from shale is good news. About a third of the natural gas is used for producing hydrogen, which in turn is used industrially to refine fuels or produce fertilizers. The large availability of natural gas at relatively low cost has allowed US refineries to increase their output. Monthly exports of finished petroleum products hovered around 25 millions barrels per month for 20 years between 1985 and 2005. Since 2005, the monthly exports of finished products from the US have grown to about 80 million barrels per month, which has also helped with the balance of payments.
The shale gas provides the US with an energy resource that is much cleaner than coal and has about one-half its carbon footprint. Natural gas-fired power plants operating in combined cycle mode (NGCC) emit less than 400 g CO2/Kwh, whereas a typical coal-fired plant emits 850 g for the same kWh. Natural gas power plants also have low capital expense: about $700/Kw capacity compared to $1400-$2000 per kW for a coal-fired plant. In the past, the gas price was high, and so the natural gas was generally used for providing power during periods of peak demand, while the coal-fired or nuclear plants were used for base power. However, if the gas price is low (<$2.00/MMBtu), there is no reason why NGCC plants could not be used to provide base power.
A few years ago the US was slated on becoming a major gas importer, in anticipation of which facilities from handling liquefied natural gas (LNG) were being built. Now it appears that US could make use of those facilities for exporting LNG. Since shutting down most of their nuclear plants, Japan and Germany have increased import of natural gas. LNG export represents a likely expansion market for US natural gas.
Apart from its use in electric power production, natural gas can also be used to fuel transportation. Although its lower volumetric energy density than gasoline or diesel may pose challenges to its use in certain types of vehicles, there exist ample opportunities for its use in delivery vans, buses, and even long-haul trucks where its operating cost advantage could outweigh the initial outlay for conversion and installing a larger tank or the inconvenience of more-frequent fueling.
The current annual consumption of natural gas in the US is around 22 tcf, and the added shale gas is a very welcome relief as is portends a supply of about 38 years—but that is at the current rate of consumption. If the consumption continues to increases at its historical average of 2.0%/yr this amount would be exhausted in 29 years, and even sooner at a higher growth rate as is expected from the opening of newer markets. The best part of it is that it buys us time to develop alternatives that can make a lasting impact.