Dateline: Copenhagen

 

Last week, Gazprom executives stated that the Russian gas giant might need to revise its investment strategy in light of the newfound abundance of North American shale gas.

Looking back on the October Revolution in 1917, Lenin famously remarked, “We found power lying in the streets and simply picked it up.” Just replace “power” with “a newfound abundance of domestic energy,” and you get the kind of gushing we’ve been hearing from the gas industry and policy makers since the United States’ so-called “shale gas revolution” began. Recent developments in horizontal drilling and hydraulic fracturing have dramatically increased the amount of technically recoverable shale gas in the U.S. As a result, the U.S., which a few short years ago was discussing major investments in new liquefied natural gas (LNG) terminals to support its growing gas imports, will be able to meet most – if not all – of its gas demand with domestic supply.   

The expected future backwash of LNG into the global market, along with new production of unconventional gas in North America, will force exporters of conventional gas to rethink their energy outlooks. Chief among those will be Russia, the world’s largest exporter of natural gas.  In a statement last week, Alexander Medvedev, deputy chairman of Russian energy giant Gazprom, said that America’s shale gas revolution “could fundamentally reshape the whole world gas market.” 

As long as natural gas means dependence on Russian supplies, European countries will be leery of making natural gas a larger component of their clean energy transition strategies. The European Union’s desire to improve its energy security by diversifying its energy portfolio will be a good argument for increased investment in renewables – but it will also be a good argument for increased investment in coal. Unfortunately, coal emits more than twice as much carbon dioxide as natural gas when combusted in power plants. By freeing more LNG for Europe, and even potentially leading the way for Europe to identify and develop its own shale gas resources (French energy giant Total recently acquired a 25 percent stake in Chesapeake Energy’s Barnett Shale gas fields in North Texas), the U.S. shale gas revolution could change Europe’s energy security calculus, allowing it to wean itself off coal with more confidence.

In a briefing at the Center for American Progress last week, Ambassador Richard Morningstar, Special Envoy for Eurasian Energy, emphasized the United States’ commitment to improved European energy security, especially with gas pipelines that are not at the mercy of Russia’s political decision making. In addition, a U.S.-EU Energy Council will strengthen research collaboration on clean technology, energy efficiency, and energy diversification through LNG and renewables. Ambassador Morningstar noted that diversifying gas supplies – in Europe and elsewhere – will be critical in reducing climate forcing:

As the world looks to reduce carbon emissions and meet climate change goals, demand for clean burning gas will likely increase. Analysts speculate that gas will function as a “bridge fuel,” filling the gap until significant quantities of renewables and nuclear power can come on line.

Exxon Mobil and XTO announced their merger last month.

When Exxon Mobil and XTO Energy Inc. announced their $41 billion merger last month, the news was big enough to penetrate the fog of war in Copenhagen – and to prompt Representative Ed Markey (D-MA), co-author of the House climate and energy bill, to call a hearing on the merger’s impact on U.S. energy markets. Congress and the natural gas industry have a lot to talk about this year, and as the hearing, which took place last week in the House Subcommittee on Energy and Environment, revealed, concerns over consolidation in the industry will be only a small part of the agenda. 

After their notable absence from the table while the House crafted climate and energy legislation last year, natural gas interests began the new year with newfound momentum. Natural gas caucuses have formed in both the House and Senate, and environmental leaders including Worldwatch Institute president Chris Flavin and former Sierra Club president Carl Pope have expressed optimism about the role that natural gas, which emits less than half as much carbon dioxide as coal when burned, can play in the transition to a low-carbon economy.

In the coming year, Congress will consider the NAT GAS Act (H.R. 1835, S. 1408), which creates and expands incentives for natural gas vehicles. Natural gas could offer numerous benefits over gasoline and diesel as a transportation fuel, chiefly its lower emissions and domestic availability, now thought to be almost a hundred year supply thanks to technological advances unlocking vast reserves of shale gas.

The natural gas industry will also have an opportunity to redefine its role in the national discussion of climate and energy legislation. As the cleanest fossil fuel, natural gas stands to gain in the power and transportation sectors – if Congress succeeds in putting a price on carbon. 

At Wednesday’s hearing, Rex Tillerson, CEO of Exxon-Mobil, and Bob Simpson, XTO’s Chairman of the Board, proved that they are polishing their message. In virtually identical language, each declared that their companies’ merger would “support our nation’s economic recovery, strengthen our nation’s energy security, and help meet our nation’s environmental goals.” These sentiments were echoed by congressmen on both sides of the aisle, who expressed interest – and in some cases, outright glee – over the jobs the merger might bring to their state, and the supply of abundant and relatively clean energy that the companies could unlock in American shale gas formations. Nevertheless, hydraulic fracturing, the controversial technique driving the shale gas boom, quickly emerged during Wednesday’s hearing as an area of concern for congressmen on both sides of the aisle. 

Representative Joe Barton (R-TX) lamented congressional attempts to restrict hydraulic fracturing.  “If we can prevent the Congress or EPA from mucking around in hydraulic fracturing,” Barton noted, “this merger should go through….Because you have a codicil in your pending merger agreement that if Congress passes legislation then I guess either party has the right to call the merger off.” 

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On the question of climate change, energy producers and environmental leaders haven’t found much common ground.  Yet on December 12, in a Worldwatch-sponsored forum on “Natural Gas, Renewables, and Efficiency: Pathways to a Low Carbon Economy,” representatives from the natural gas industry, environmental non-governmental organizations, and government discussed one energy resource with which a growing number of these groups finds significant agreement: the potential for natural gas to facilitate the transition to a low-carbon economy.

The event, which Worldwatch cosponsored with the American Clean Skies Foundation and the United Nations Foundation, marks the launch of a new Worldwatch Natural Gas and Sustainable Energy Initiative.  As part of this initiative, Worldwatch will study the opportunities and challenges that the newfound abundance of U.S. and global natural gas presents.

A few short years ago, talk centered on a day not too far in the future when we would run out of natural gas.  The expected abundance of unconventional resources has changed that horizon and there is now discussion of 100 years or more of supply.

Vello Kuuskraa of Advanced Resources International presented information about unconventional resources, where they are known to reside, and where more work needs to be done to determine what the resource is.  While North America has abundant shale gas supplies, for example, more work needs to be done in China and India to know more precisely what is there.  Kuuskraa also noted that while there is a lot of gas worldwide, the question of developing it must be asked consistently through the lens, “at what cost?”

Senator Tim Wirth, President of the United Nations Foundation, noted that natural gas has the potential to provide a ready-to use alternative to burning CO₂ intensive coal, as gas in the electricity sector, on average, is 50% less carbon intensive than coal.  

Christopher Flavin, President of Worldwatch, painted the picture of the role that natural gas can play in the transition to a low-carbon economy.  Natural gas, Flavin noted, is best viewed as a key component in a broadened fuel portfolio that includes far greater reliance on renewables and energy efficiency.  Gas can provide key baseload power as a complement to variable renewable energy if the two are married.  Flavin also pointed out that the current fleet of natural gas plants in existence in North America runs at less than 50 percent capacity, so better use of the current infrastructure is a good first step toward greater efficiency as well.

Aubrey McClendon, CEO of Chesapeake Energy, offered a broad tutorial on the extraction and use of natural gas.  McClendon pointed out that natural gas represents a 25 percent reduction in greenhouse gases in the transport sector when compared to oil.  Chesapeake is one of the leading companies developing shale gas reserves in North America.  McClendon called on the industry to voluntarily engage in transparency practices, as his company does, by listing on the company website the chemicals used in the hydraulic fracturing process used for extraction.

These points, as well as discussion of the politics and policy governing use of natural gas continued through a panel discussion that included Ian Smale, Group Head of Policy and Strategy for BP, Maggie Fox, Executive Director of the Alliance for Climate Protection, Holmes Hummel, a Senior Policy Advisor with the U.S. Department of Energy, Jörg Gigler of KEMA in the Netherlands, and Jyoti Parikh from Integrated Research and Action for Development (IRADe) in India.

Discussion focused, in part, on the environmental impacts associated with extraction of conventional and unconventional natural gas resources.  Fox noted that impacts on water, air, and on communities is something to which companies and regulators alike need to pay careful attention.  Transparency and willingness to pay for necessary safeguards was the call to action.

The policies surrounding extraction and use of natural gas, and the accompanying politics that can lead or prevent good policies was a theme that ran through the afternoon.  Agreement that deployment of this resource, in the context of an expanded portfolio of energy resources, including renewables and efficiency, can help boost the glide path to a low carbon 21^st century economy.

A video of the event is available online from Clean Skies TV.

As I tried to complete my work yesterday evening, my house not unusually experienced a series of lengthy power outages. These went on from around five o’clock in the evening until long past midnight. Not only did this mean that all light in the room vanished, that temperatures soared into the high and humid 40s Centigrade, and that I could no longer see the mosquitoes coming silently closer; it also made me think.

This is Delhi, India’s capital city; and one of the most affluent, vibrant and well-resourced cities in the country. Yet even here, power outages are a daily occurrence, water only reaches the taps for certain hours of the day, infrastructure is still being built, and people of all ages sleep on the streets at night. Further afield, things are in some ways better and in many ways, worse. Whereas cities concentrate some problems, with the crowding, sanitation and infrastructural challenges that a booming population brings, many rural areas have no electricity at all and far more scarce or polluted water supplies. Job availability, access to education, healthcare and many other opportunities are often much more limited than in cities.

This is the reality of a developing country. All of these conditions have a marked impact on people’s efficiencies and productivity, making goals harder to achieve and tasks take longer. Yet how often do we remember this fact as we bandy around the term ”developing nation” freely in the international negotiations. Non-Annex 1,” “emerging economy,” “global south”… These have become so technical, but do we stop enough to reflect on what these terms truly mean?

In this regard, I can’t help but think about the challenge that preparing for the climate negotiations must be for each of these countries. To different extents, they are all working to build roads, find and secure essential resources, expand education and healthcare, create jobs and improve the wellbeing of their many poor. Their capacity is oftentimes spread so very thin. This simple fact alone puts developing nations at a disadvantage as they seek to come head to head with their ”big brothers” in Copenhagen. Can they sufficiently prepare?

The light flicks on and the fan kicks into gear as quickly as it vanished. I don’t know how long it will last this time, but I hope a little longer.

The only fossil fuel that can reduce carbon emissions

The need to dramatically reduce carbon dioxide emissions while enhancing energy security and providing economical energy services is one of the greatest challenges facing the world today. Achieving these goals will require a transformation of the global energy economy and must be based on a robust combination of resources and technologies.

Natural gas has recently emerged as a vital but neglected complement to the paragons of low-carbon energy: renewable energy and energy efficiency. Recent developments in technology, from gas wells to home appliances, suggest a need to fundamentally reevaluate the role of natural gas in the energy system. Together with renewable energy and energy efficiency, natural gas should be a cornerstone of strategies to advance energy security and reduce the threat of climate change—a conclusion that has recently been supported by U.S. environmental leaders, including Robert Kennedy, Jr., John Podesta, Carl Pope, and Tim Wirth.

Compared with coal, natural gas allows a 50–80 percent reduction in greenhouse gas emissions, depending on the application. While U.S. oil production and reserves have been declining for nearly four decades, natural gas production and reserves have risen dramatically in just the last few years. Some estimates indicate that gas may actually be more abundant than coal and that U.S. gas production can continue rising for decades to come, allowing it to serve as a transition fuel—eventually replaced by hydrogen derived from renewable sources. Most countries have not yet fully explored their potential for unconventional gas, but early research indicates that it is equally abundant globally.

Natural gas is the only fossil fuel that can, with existing technology, immediately contribute to reducing oil dependence and solving the climate problem by reducing carbon dioxide emissions. Expanded use of natural gas could rapidly substitute for the older coal-fired power plants that are not targets for carbon capture and sequestration (CCS). And natural gas-based electricity can provide the reliable power supplies that are needed to complement intermittent energy sources such as wind and solar power.

The potential of natural gas to contribute to advances in energy efficiency and to facilitate renewable energy deployment have so far been ignored by most policymakers. This was abundantly clear in the American Clean Energy and Security Act (ACES) passed by the U.S. House of Representatives this June. That bill is tilted heavily toward support for coal and includes little support for natural gas.

Policy support for natural gas is one of the keys to rapid reductions in carbon emissions over the next few years. And beyond that, it holds out the promise of eliminating coal-based electricity by 2030.