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'Golden Rules' to Drive Gas Growth, Says IEA Exec

August 27, 2012
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For global unconventional natural gas to reach its full potential, the energy industry has to be willing to work with regulators and conservation groups to address legitimate concerns, the executive director of the International Energy Agency (IEA) told an audience recently at Rice University's Baker Institute in Houston.

Maria van der Hoeven discussed the potential of shale and tight gas in the United States, but she warned that the industry has a big part to play in alleviating public concerns about water and air emissions associated with onshore drilling, and in particular, hydraulic fracturing (fracking).

"The risks are real that public sentiment will derail these technologies," she said. A balance still has to be found for regulators about whether to be too permissive or overly strict, she added.

"If people tell me they know what they're doing, then they don't know what they are doing." Explanations have to be more complex than that, van der Hoeven said. "Societal and environmental concerns about fracking are legitimate..."

Her remarks mirrored some she made in late May when the IEA issued its World Energy Outlook, "Golden Rules for a Golden Age of Gas," which offered recommendations for unconventional gas drillers (see NGI, June 4). The report offers two possible trajectories for unconventional gas. Under one scenario good practices and principles underpin a brisk expansion of unconventional gas supplies. In the second scenario, a lack of public acceptance dampens production, with output only slightly above current levels in 2035.

The technology and know-how exist for gas to be produced in an environmentally acceptable way, the IEA executive stressed. Gas producers, however, have to demonstrate that they are listening to concerns and are willing to take action. "It's practice, not preaching." It's not enough for gas advocates to claim that "banning fracking would increase energy imports and global dependence on coal," she said. The public may not understand that.

With public acceptance, North America should become a net gas exporter, said van der Hoeven. But, she warned that "energy independence is complex...We need to keep our aspirations in check."

The IEA executive, whose trip to Houston was sponsored by Shell Oil Co., toured an Eagle Ford Shale site in South Texas while she was in the state. She was told that Chinese companies are among the most frequent visitors to South Texas drilling sites, which she said indicates their interest in securing North American unconventional technology.

The North American surge in liquids already is impacting global markets. However, the United States likely will remain a crude oil importer, especially as Gulf Coast refiners already have invested in the capacity to process heavy crude from Canada and overseas, said van der Hoeven.

"Overall markets will remain interdependent," but "we cannot ignore that a shift is occurring." Increased domestic production will have "implications" for energy-producing regions around the world.

The world will continue to need fossil fuels well into the future, but "coal is at the bottom of the list." The IEA believes that "prudent development of renewables is essential." What is a problem is "over subsidizing" fossil fuels or renewables, she said.

"While ambitious, a clean energy transition is still possible. But action in all sectors is necessary to reach our climate targets." To move toward a more sustainable energy future, energy prices have to reflect the "true" cost of energy, which "means pricing carbon and abolishing fossil fuel subsidies, subsidies which in 2011 were almost seven times higher than support for renewables."

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