The Future of Natural Gas: Supply and Impact

Finally, the automobile sector currently uses very little natural gas, but in the future, demand for gas powered vehicles could increase if some form of government climate change legislation is introduced. That said, there remain many barriers to the widespread use of natural gas in automobiles, which makes it difficult to speculate on the future of this sector.

Forecasts:

As the demand for natural gas increases, the gas industry will have to increase its production in order to meet this demand. In 2000, total world production of gas was 2422.3 billion cubic metres and grew by 4.3%.

Demand for natural gas will always exist unless we find an energy source with better qualities, but eventually gas reserves will start running low and companies will not be able to produce enough. The concept of peak gas refers to the period where natural gas will reach its peak production level and from then on will continuously decline until there is possible none remaining. In case you are starting to panic, the good news is that current reserves are high and “estimates” of these reserves continue to grow because of improvements in exploration and technology.

In the past decades the revised additions of reserves have exceeded the production of gas due to major discoveries in Russia, Middle East, Netherlands and Indonesia. However, the number of new gas discoveries is in a decreasing trend, which means that future production could grow at a slower rate (see 100 Year Gas Demand Graph). Also, these discoveries are being made in deeper levels of land, in greater depths in the ocean or are further away from where markets are located (meaning that in order for these sources to remain profitable, the private or government sector will have to continue enhancing its technology).

In all, with our current level of gas reserves, researchers have estimated that we have 60- 70 years until we start running in to trouble. On another note, although this article is not meant to provide financial advice, investing for the long term on natural gas might not be a bad idea since increasing demand and decreasing supply will lead to higher prices.

Impact:

Now that you have understood the importance of copper, it’s time to understand the real market and how we will be affected. Unlike some other commodities, natural gas exists within regional marketplaces instead of the global marketplace. This is because it is difficult and currently not cost effective to transport natural gas all over the world and thus trade is limited.

Some ways in which natural gas can be transported is pipelines or tankers of LNG (liquefied natural gas), but both of these have their problems. For example, with pipelines there are various legal and logistical problems that come into play because the projects span wide areas of land. These problems have resulted in very little international trade in natural gas and any trade that is done is usually within regions (e.g. in North America, all of Canada’s natural gas exports goes to the U.S).

The importance of this characteristic of the market is that countries without enough gas reserves will be impacted sooner and more severely from gas shortages. So how will this affect Canada?

According to some estimates, peak production of gas has already occurred as producers are struggling to keep output high. However, according to another study, the North American peak in production is expected to be around 2013, after which production will fall.

The substitute for production is to import gas, but with the technology that we have today, importing liquefied natural gas is too difficult and requires new infrastructure which is very capital extensive. The other option is through pipeline, but it is unlikely that the U.S. will export its own gas to us because of its own requirements.

Not to scare anyone, but the question now remains how we will survive the cold Canadian winters when resources such as natural gas start to run out. This question could become very important for many of us students later on in our lives if we do actually experience energy shortages, such as natural gas. Unfortunately, natural gas is yet another fossil fuel that we have come to depend on. And so as a society, it is important for us to attempt to find the answers of how our future energy needs will be met and to change our mindsets so that we can limit our current consumption.

ARB Team
Arbitrage Magazine
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