The Future of Natural Gas

I wanted to take some time to dig a bit deeper on natural gas. Given that part of my career now revolves around the fuel, I thought it’d make sense for me to write a bit about what exactly is natural gas (fuel or foe?), and what the future holds for it.

I’ve referenced work from throughout the web in this post, but the main source of truth was Vaclav Smil’s book “Natural Gas: Fuel for the 21st century”. Smil is a renown energy expert, someone who’s name I’ve come across again and again in blogs and articles, so to truly understand the fuel, I decided to give his book a perusal as my baseload of information. I thought it was a great read and absolutely worth it, though my family thought it was a strange use of my weekend time. Give it a purchase!

Origins

As of 2023, natural gas makes up 23.3% of the world’s consumption of energy, trailing coal at 26.6% and oil at 31.7%; this is a marked increase from as early as 1965, when the split between the 3 were 14.5 / 37.3 / 41.5 % respectively. While all three are considered fossil fuels, natural gas is distinguished by it’s gas state, as opposed to coal, which is solid, and oil (petroleum) which is liquid.

Natural gas is composed of multiple alkanes, a hydrocarbon. Methane - colorless, odorless, plentiful - is the simplest of all the alkanes, denoted by its chemical signature of CH4. It generally makes up 70-90% of natural gas; the rest is filled in with natural gas liquids (NGLs), which include ethane (C2H6), propane (C3H8), butane (C4H10) and pentane (C5H12)¹

Source: Western Oregon University

Natural gas also includes trace amounts of CO2, nitrogen, H2S, and water vapor, but these compounds, including the heavier C2-C5 alkanes from ethane to butane, are removed pre-transportation to avoid corrosion in gas pipelines. The NGLs, which are removed because they liquefy at surface level, are then sold off to the petrochemical industry for further refining.² Methane is thus the overwhelming remaining component of natural gas post-processing.

But enough chemistry. What’s far more interesting than natural gas’s composition is its origins. For years, I’ve cooked food with a flicker of natural gas seeping in from gas tank, but never really questioned where it all came from. But as it turns out, the history is sordid: death, decay, and patience is abound.

Disappointingly, it doesn’t begin with dinosaurs. Natural gas is first derived from dead biomass of the smallest organisms such as phytoplankton and zooplankton (the difference being that phytoplankton produce their own food, while zooplankton consumer for their food, namely, other phytoplankton). Instead of being the remnants of large and ferocious predators, most of natural gas is from the remains of these small organisms, found in marine sediment. The well worn fable of a T-Rex powering our vehicles is a little poetic, but a lot wrong.

Source; “At least I didn’t end up powering a Honda Civic!”

From there, the earth presses and burns. Degradation through microbial metabolism, followed by anaerobic fermentation (the type that makes bread dough rise!) releases CO2, CH4, and H2S, while compression through burial via accumulated of sediments produce waxy kerogens, a type of large organic molecule that are found in sediment. In the most oil rich of sediments, they can be up to 10% of the mass of the shale found, but are generally 1-2%.³

Finally, thermal cracking, a heating process that levered in crude oil refineries, breaks up the kerogens into bitumens, a dark and more soluble form of organic matter, and then a deeper cracking of the bitumens themselves produce liquid hydrocarbon. When temperatures reach the range of 157-221 degrees Celsius around the liquid, it becomes natural gas through a process called metagenesis.⁴

Naturally, this process takes awhile, and the process from biomass → sediment —> thermal cracking —> natural gas can take millions of years. As Vaclav writes:

Hydrocarbons in young (Cretaceous, 145-65 million years ago) reservoirs tend to be mostly heavy crude oils, lighter crude oils come from Jurassic of Triassic formations (younger than 250 million years), and the lightest alkanes are often of Permian or Carboniferous age (up to 350 million years old)

Source: Smil, Vaclav - Natural Gas page 15

And because carbon preservation is much lower in the marine sediments, the long winded conversion of biomass to natural gas is hardly efficient: it takes about 12,000 units of carbon in ancient biomass to produce a unit of carbon in methane; for coal, it takes only 8 units of ancient carbon.

Supply and Extraction

But for all the trying patience it requires to produce natural gas, supply isn’t a concern. Despite global increasing consumption each year, estimates peg a 52 year runway until exhaustion, with 6.923 trillion cubic feet (Tcf) of proven gas reserves in the world as of 2017.

Source: Our World in data

And this understates the actual value of reserves - proven gas reserves are not scientific facts, but rather estimates of natural gas resources that are economically and physically able to be recovered under current conditions. But through exploratory drilling and technological leaps (hydraulic fracking for shale gas), proven gas reserves can increase each year as more and more resources become economically exploitable. The below chart highlights this impermanence.

Source: EIA

The faults and fissures of natural gas

Still, natural gas remains a fossil fuel, and like any fossil fuel, it poses a climate risk. It emits two kinds of GHG emissions - methane, and CO2 - which puts a hard limit on its eventual role in a net zero economy. This isn’t to say it’s as dirty as coal or oil; because of methane’s chemical structure (CH4), it’s energy content per carbon emission is much higher than other fossil fuels.

It all comes down to its atomic structure. Coal, which was the first dominant source of fossil fuels in the world energy supply, has a H:C ratio of 1. Liquid fuels, extracted from oil, the second fossil fuel that displaced coal’s spot on top, has an H:C ratio of 1.8 - meaning, for every 1 unit of carbon emitted, 1.8 units of Hydrogen (or energy) were created. And because natural gas has an atomic H:C structure of 4:1, it creates 4 units of energy per 1 unit of carbon.

In other words - per unit of CO2 emissions, natural gas is by far the most efficient and thus clean-burning.

As the EIA explains it:

The amount of CO₂ produced when a fuel is burned is a function of the carbon content of the fuel. The heat content, or the amount of energy produced when a fuel is burned, is mainly determined by the carbon (C) and hydrogen (H) content of the fuel. Heat is produced when C and H combine with oxygen (O) during combustion. Natural gas is primarily methane (CH₄), which has a higher energy content compared to other fuels, and thus, it has lower CO₂ emissions relative to its energy content. Water and various elements, such as sulfur and noncombustible elements, reduce the heating value of a fuel and increase CO₂ emissions per unit of heat content.

Source: EIA

Natural gas is thus the final evolution of fossil fuels - managed well, it provides the reliability and cheapness of fossil fuels, but at a much lower carbon intensity.

Unfortunately, the fuel itself emits more than CO2. When combusted at the end of the supply chain, natural gas emits less CO2 than other fossil fuels. The issue, however, lies upstream in the uncontrolled release of pure methane. As marked here in the below diagram, a common theme throughout the natural gas supply chain is a constant risk of methane leaking.

Source: EFIF Foundation

Methane, like other alkanes, when combusted is oxidized to form CO2 and water; but upstream, pure methane is often released into the atmosphere in various intervals from hydraulic fracking, drilling, venting, and long-distance transportation. The concern is that methane is > 80 times as potent as carbon dioxide at trapping heat in the atmosphere over a 20 year period, and has become a growing issue as methane concentrations have more than doubled in the last two centuries due to human activities.

There’s a wide variety of estimates of how much natural gas production results in methane leak (anywhere from 1% to 10% of total gas production), with 2% as the breakeven point with coal in terms of global warming potential.

Without technical expertise, I’m left to mimic an economist in the eyes of Harry Truman on this matter. On one hand, there is low hanging fruit to reduce methane waste and flaring are available, and no technical barriers seem to prevent us from ever overcoming this particular thorny issue.

But on the other hand, fracking, a new method of natural gas extraction that has rocketed the US to the world’s top gas producer, and turned it from a net importer to exporter of gas, can have methane leakage rates up to 7.9%, far above the 2% threshold needed to be more sustainable than coal. As of today, estimates peg fracking to make up 60% of the US’s output in natural gas.

Source: Ballotpedia

The uncertain future of natural gas

When evaluating any energy source’s future, it’s important to assess it based on three criteria:

• Equity: Is it accessible and cheap for the average household/consumer/business?

• Security: Can it reliably be provided to meet energy needs?

• Sustainability: Can it help the world meet net zero goals by reducing carbon emissions?

Fuels that struggle greatly in one (sustainability for coal, and equity for concentrated solar power) have no wide scale potential in the future energy economy. Those that can do all three (theoretically nuclear and solar + cheap storage) are generally deemed to be the best of all solutions, but cheap storage has not yet arrived, and nuclear is still a few years away from scaling back up after decades of lost progress due to unfounded fears over its safety.

Source: Doomberg

So where will natural gas fit into all of this?

Let’s take the baseline view first, from someone of renown. Back to Smil, who is an unapologetic proponent of the scales of inertia of

On the note of security and equity, natural gas is both secure - expanding LNG markets and strong reserves have made supply and logistics a non issue, and if we’re strictly talking for the US, the shale gas revolution has made the country the top producer in the world - and cheap, thanks to exploding production over the past 10 years.

Source: EIA; a little outdated, but the US shale gas revolution triggered a collapse in prices

Meanwhile, because its capacity factor (the % of time it’s producing power) ranks second only to nuclear, it makes for an excellent source of baseload power. For all the talk of renewables being cheaper than fossil fuels now, the intermittency problems sources such as solar and wind possess right now make those energy sources unreliable, and oftentimes, states that rely on solar/wind for big chunks of generation leverage natural gas peaker plants to serve as backups for high demand periods.

But sustainability is still the main gripe with natural gas, with even the more conservative climate sources admitting it’s limitations there. While it emits less pollution per unit than coal and oil, it also leaks methane throughout its production process. And while natural gas has quietly been responsible for a large reduction of emissions over the past decade…..

It’s quite the American success story. Replacing coal-fired power generation with natural gas has lowered emissions and reduced energy costs, all while maintaining reliability of the electric grid.

In fact, the shift to natural gas in the U.S. power sector was directly responsible for reducing about 500 million metric tons of CO2 from 2005 to 2022. That’s about 60% of total power sector reductions since 2005.

But we aren’t done yet.

There is still an opportunity to continue to switch the remaining 200-plus operating coal plants in the U.S. to gas-fired generation. Doing so is equivalent to removing 80% of all the gasoline powered cars off the road in the U.S. for a year.

Source: Williams

…..it’s skeptical more natural gas usage is the solution to the world’s decarbonization goal.

At the same, it may be too optimistic to expect that increased use of natural gas will bring substantial decarbonization of the global energy use. Indeed, simulations by McJeon et al. (2014), based on five state-of-the-art integrated assessment models of energy-economy-climate systems and independently forced by an abundant natural gas scenario, show large increases in the combustion of gas (up to 170% more by 2050), with the resulting impact on overall CO2 emissions ranging from a modest decline of 2% to an increase of 11% and with a majority of the models indicating a small gain (range of -.3% to 7%)

Source: Smil, Vaclav “Natural Gas” Page 175

So back to the beginning of the article. I’m not a gunslinger, so I’m not going to call my shot here, but with gas currently sitting at 23% of global energy consumption, it’s important to highlight several reasons why consumption might or might not grow over the next few decades.

Mckinsey’s report of global gas outlook in 2050 is a popularly referenced source of truth, with global gas demand peaking by 2037, and slightly declining by 2050, with incremental increase from now until then.

Source: Mckinsey

All energy sources should not be evaluated in a vacuum, and natural gas is beholden as any other. A focus on reducing emissions will lead the answer to solar and nuclear and as both sources get cheaper and more reliable (solar, with falling costs of storage, and nuclear, through SMRs), it feels only inevitable they will begin to eat natural gas’s lunch. Still, I wanted to list a few reasons why I’m skeptical of claims natural gas will fade away

1. Flexible usage

   1. Natural gas is an utterly critical component for fertilizer production, via the Haber Bosch Process, which leverages it as a source of hydrogen and high-temperature process heat to produce nitrogen fertilizer on a global scale. Invented in the 1900’s by a German chemists Fritz Haber and Carl Bosch, it replaced the previously limited sources of nitrogen that included manure and leguminous crops. Elimination of this fertilizer would lead to a halving of a food production worldwide, as nitrogen levels in soil were a constraining factor to crop productivity⁵

2. Infrastructure and friction

   1. Natural gas is a readily mature market, with a mature export/import system through LNG tanker ships; the US alone has about 3 million mainline miles of pipelines that transport gas all around the country⁶ . This in place system of convenience will provide an incentive (mainly in capex costs) to keep the ecosystem as is

   2. Meanwhile, gas is used as heat for industrial processes and domestic buildings. While there has been a strong move to move away from natural gas heating for space and water heating (in the form of heat pumps), building stock is notoriously slow in turning over and changing infrastructure, giving a long runway market for the fuel. In terms of industrial processes, natural gas is the cleanest, best option for heating given heat pumps can’t reach the necessary temperature needed (>100 degrees Celsius), though I will admit Sean Fleming makes a convincing case for thermal batteries as a competitor in the near future:

      The promise of hot bricks

3. Scale

   1. The lasting impression Smil left me through his book (and his excellent thesis “Halfway between Kyoto and 2050”) was that the wider energy transition that is much ballyhooed today has been overestimated. Despite glowing articles such as this, renewables have barely made a dent in the consumption profile of the world. From the time world leaders first met in Kyoto in 1997 to agree on a limitation of GHGs, the relative dominance of fossil fuels has maintained, with it still making >80% of global energy consumption, 27 years later:

      

      Source: Our World in Data

   2. The reason for this glacier like change is simple - the scale of energy that needs to be replaced is enormous, compared to past energy transitions, and the complexity of the system is astounding. Per Smil:

      In the year 2000, the global TPES [Total Primary Energy Supply] was about five times larger than in 1950 and roughly 10 times the size of supply in 1900, and hence (even in the absence of any resource constraint), it has become progressively harder for a new source to claim a significant share of the overall demand

      Source: Smil, Vaclav “Natural Gas” Page 175

      The current energy networks are complex, their establishment and operation require constant maintenance and upgrading, and their costs are considerable, yet they are only one of many parts that make up the vastly more complex global energy system. That is why global energy transitions are complicated, multifaceted, protracted, and in their details rather unpredictable. They require system changes that involve mass-scale development, adoption, and massive scaling-up of new techniques (be they large-scale “green” hydrogen electrolysis or extensive multiplication of small modular fission reactors).

      Source: Smil, Vaclav “Halfway between Kyoto and 2050”

So I’m not going to hold my breathe on wild swings in the natural gas industry. My first pass through of my readings has me at a stasis with natural gas - while its emissions make it an unlikely candidate to expand further into our ecosystem, it’s cheapness, multi-varied usage, strong supply chain/infrastructure ensures that it will still carve out a stronghold in the growing global consumption of energy.

1. Alkanes can be distinguished by a simple formula - C(n)H(2n+2)

2. Smil, Vaclav. Natural Gas, Page 3

3. Smil, Vaclav. Natural Gas, Page 15

4. Smil, Vaclav. Natural Gas, Page 15

5. Liberty Energy. Bettering Human Lives Page 50

6. EIA. Natural gas explained