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A Major Shift in Energy Due to Natural Gas
-The Dawning of the Golden Age of Natural Gas? -

Masanori Kurihara
Professor, School of Creative Science and Engineering, Waseda University

Energy is essential for mankind

As a result of the Great East Japan Earthquake Disaster that struck on March 11th of last year, and especially the accident at the Fukushima Daiichi Nuclear Power Plant, the most attention has been focused on energy since the oil crisis. Needless to say, energy is essential to human life-along with food and water-and energy input is vital in providing and maintaining food, clothing, and shelter, of course, as well as in shoring up the foundation of human life, including the development of infrastructure, transportation, and the manufacturing of tools and chemicals. The self-sufficiency rate of this energy is purely just about 4%, and it is less than 20%, even when quasi-domestic energy comprising nuclear energy is included. Therefore, from the standpoint of energy security, an increase in the proportion of nuclear power generation to the level of 50% had been planned, but because of the Fukushima Daiichi Nuclear Power Plant accident, this plan had to be brought back to the drawing board. Now that it has been determined that the impact of an accident occurring when safety is not secured is extremely serious and extensive, without going so far as to say post-nuclear, a flow toward reducing the proportion of dependence on nuclear power is inevitable. Accordingly, expectations are gathering for wind and solar power, but there are myriad challenges that must be resolved with these forms of renewable energy-including output that fluctuates depending on weather conditions, low energy density per unit area, high costs, and the like-and resolving these challenges will take time.

In addition, as nuclear and renewable energy are basically used to generate power, they cannot be used in applications such as for transportation and iron manufacturing (there are no nuclear powered cars, and iron smelting cannot be done with solar or wind power). Since electricity comprises less than 30% of final energy, a discussion of energy issues must be taken in perspective with the overall energy outlook including what is required for power generation. For example, although the saving of precious energy must be promoted, it should not be limited to saving electricity. We have to find ways to decrease the input energy by measures such as improving power generation efficiency and energy efficiency in manufacturing.

This author believes that there is no other way to solve short and medium term energy problems than to place fossil fuel energy-which currently accounts for more than 80% of primary energy-at the center of energy, including power generation. The concerns in doing so would include problems such as depletion of fossil fuel, CO2 emissions, energy security, costs, and the like. These problems will be discussed in detail in the resource assessment study report that will be published by the Japan Petroleum Development Association sometime this summer, so I would like to devote particular attention in this essay to natural gas within fossil fuel energy-regarding which the so-called shale gas revolution was attracted much attention, and which was introduced in the subtitle of the International Energy Agency (IEA) Special Report: Are we entering a golden age of gas?-considering whether natural gas can become the savior of energy.

The appeal of natural gas

Figure 1 Presence of conventional/non-conventional natural gas resources

As shown in Figure 1, the normal (conventional) reservoir of natural gas is formed by the movement of the hydrocarbon gas that has matured in the shale, which is known as source rock, and by the accumulation in rock that is highly porous and permeable. The pressure of the natural gas that accumulates in the reservoir is high, so natural gas wells erupt easily when they are drilled. As a result, the energy (calorific value) in the natural gas that is produced reaches 20 to 100 times the energy input to produce the natural gas. In addition, the carbon dioxide emissions per calorific value during combustion are some 50% those of coal, and 70% those of oil, with no emissions of sulfur oxide or soot dust at all. Natural gas therefore has the advantage of the smallest environmental footprint of fossil fuel energy sources. Natural gas also has broad application, not only for power generation and town gas, but it can also be converted into raw materials for chemicals such as chemical fertilizers and methanol, and recently, use as a hydrogen source in fuel cells is anticipated. This is why natural gas accounts for 25 to 40% of primary energy-in major developed countries-and this proportion is expected to steadily increase going forward.

In Japan, on the other hand, natural gas accounts for little more than 15% of primary energy. The reliance on imports for 96% of domestic natural gas consumption and the need to purchase expensive Liquefied Natural Gas (LNG) may be impeding the shift to natural gas. When we consider, however, that the efficiency of natural gas combined cycle power generation is 1.5 times higher than that of coal-fired power generation, that the cold generated when LNG is vaporized can be used in cold storage warehouses and the like, and thus LNG can contribute to energy conservation, the percentage of natural gas should continue to increase in Japan, just as in other developed countries. The Tokyo Metropolitan Government plan to construct a natural gas combined cycle power plant is a good instantiation of this trend.

Since natural gas is also a fossil fuel, however, concerns that it will be depleted sooner or later are undeniable. The remaining recoverable reserves of conventional natural gas in the world are estimated to be some 6,400 trillion cubic feet, and if this is divided by an annual production of 106 trillion cubic feet, natural gas production is estimated to last about 60 years. Going forward I believe that, as new natural gas fields are discovered and natural gas production from natural gas fields that is not yet possible becomes possible through technological advances, the number of years will increase, and the revision upward in the amount of recoverable natural gas far beyond these expectations appears in the unconventional natural gas shown in Figure 1. Even at the present time, when reserves have not been thoroughly evaluated worldwide, it is estimated that the recoverable reserves of tight sand gas accumulated in rock with low permeability, coalbed methane gas absorbed in coal bed fissures (cleats), and of shale gas are some 400, 800, and 6,600 trillion cubic feet, respectively.

When the unevaluated portion is added in, the consensus of the world's energy experts is that recoverable reserves of natural gas will last for more than 200 years. There are also large amounts in the coastal waters of Japan, and the amount of methane including methane hydrates that has attracted attention as a prized unconventional natural gas is one to two orders of magnitude greater than the amount of recoverable reserves of these natural gases, but this is currently in the stage of production testing, which will take some time before commercialization.

Shale gas revolution

Shale gas is the unconventional natural gas that has captured the most attention-even dubbed a revolution-and it is dramatically changing future energy strategies. As shown in Figure 1, shale gas is a natural gas that is generated through maturation in source rock, and it accumulates in the source rock because it cannot escape from source rock that has low permeability. Consequently, there are vast reserves of shale gas, and they are distributed extensively throughout the world, as shown in Figure 2.
Shale gas, however, cannot be extracted simply by drilling gas wells and letting it out, as is done with conventional natural gas. Although development progressed slowly, entering the 2000s, the development of the comprehensive technologies shown in Figure 3-(1) the technology to drill wells horizontally in the source rock (2) the technology known as hydraulic fracturing, in which special high-pressure fluid is injected to create a number of fractures like a mesh of net in the source rock, and (3) efficiently controlling the fractures by monitoring the expansion of the fractures-succeeded in producing natural gas at a lower cost.
Currently actual production is only being done in the U.S. and Canada, but there are signs of expansion, such as the entry of oil majors and the development in Europe.

Figure 2 Distribution of the technically recoverable amount of shale gas in the world

Figure 3 Overview of horizontal wells and multistage hydraulic fracturing

Ironically, as production of the shale gas that can be developed at a low cost continues to increase, the price per million British thermal units (1 BTU = 1,055 joules) in the U.S. fell below two dollars. In addition, there are suspicions that the special fluid used in hydraulic fracturing containing chemicals pollutes the shallow aquifer and the groundwater, and the supply of drinking water and industrial water are adversely affected. Some states in the U.S. are therefore strengthening inspection systems and regulations. Technologically, shale gas development has achieved great success, but there are still issues that must be addressed, such as natural gas prices and environmental problems.

The outlook for energy going forward

Due to the success of shale gas development in the U.S., they were able to generate a surplus in the supply of natural gas, which they have begun preparing to convert into LNG to export. Because the price of LNG in the U.S. is set according to the supply and demand of natural gas, adding the cost of liquefaction and transportation to the current natural gas price of 2 dollars per million BTU is expected to raise this price to a level of 10 dollars. The price of the LNG that Japan currently imports from Southeast Asia, Australia, and the like, on the other hand, is 16 to 17 dollars per million BTU, because it is linked to the price of crude oil. For this reason, oil development companies and general trading companies are rushing to get a stake in U.S. and Canadian shale gas concession areas and engaging in negotiations for the procurement of LNG. I believe that the intentions of the U.S. government are a factor, and everything won't necessarily go smoothly, but the existence of inexpensive LNG is surely expected to be a trump card in future LNG price negotiations. Although natural gas prices may increase a bit going forward due to balancing with oil prices, increased costs for environmental measures, and the like, many energy experts recognize that natural gas is an excellent energy source-from each of the standpoints of the amount of recoverable reserves, prices, energy efficiency, and convenience-and natural gas is expected to increasingly important throughout the world. Japan cannot miss out on vying for these inexpensive natural has resources either.

Figure 4 Expected LNG supply sources for Japan in the near future

From the standpoint of energy security and risk management, however, it is dangerous to rely solely on natural gas as the source of the energy supply, and it is vital to deal with energy issues through diversification at various stages. That is, in selecting energy sources, reduce reliance on nuclear power, use coal-fired power generation as a base load source of electricity while setting a focus on natural gas, and use oil primarily for transportation fuel and petroleum products. Further, I believe the best mix incorporates renewable energy that is used for the time being in small-scale local production for local consumption, and looking forward to technological developments including new energy going forward. Also, natural gas suppliers should be expanded to include North America and Africa, in addition to the traditional Southeast Asia, Australia, Middle East, and Russia. Furthermore, regarding the means of transport, not only LNG, but also transport by pipeline and freight train should be considered. It is the diversification of the energy supply and the development of energy-saving technologies such as natural gas combined cycle power generation and the like, that will lead to energy security for a Japan that lacks domestic energy resources.

Masanori Kurihara
Professor, School of Creative Science and Engineering, Waseda University

[Profile]
1955 Born in Yokohama
1978 Graduated, Department of Mineral Resources Engineering, Faculty of Science and Engineering, Waseda University
1980 Completed Master Course of Natural Resources Engineering and Metallurgy Science and Engineering, Graduate School of Science and Engineering, Waseda University
1980 Joined Japan Oil Engineering Co., Ltd.
1995 Received Ph.D., Department of Petroleum Engineering, University of Texas at Austin
2009 Joined Board of Directors, Japan Oil Engineering Co., Ltd.
2010 Received the Minister's Award for Science and Technology, Ministry of Education, Culture, Sports, Science and Technology, for research on methane hydrate production methods
2011 Professor, Department of Resources and Environmental Engineering, School of Creative Science and Engineering, Faculty of Science and Engineering, Waseda University

Primary works (all co-authored):Geostatistics [Chikyu tokeigaku] (Morikita Publishing), Pioneering the Future of Petroleum and Natural Gas Resources [Sekiyu/tennen gas shigen no mirai o hiraku](Japanese Association for Petroleum Technology), State of the Art of Natural Gas Energy (Corona Publishing)