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Experts Review Natural Gas Potential, Possible Global Market

If natural gas evolves over time into a global market, it is not likely to parallel the oil market with volatile high prices enabled by cartels and inflexible demand, since neither of those factors are likely to develop in the natural gas industry, according to one of the authors of a recent Massachusetts Institute of Technology (MIT) study (see Daily GPI, June 13).

With the broader potential for natural gas around the world "there appears to be much less leverage to cartel behavior," Ernest Moniz, director of the MIT Energy Initiative, told a Senate committee hearing Tuesday. In addition, the fact that there are a lot of substitution possibilities for natural gas in its main market, space heating, means gas can be "substituted out" by other fuels, while there are no good substitutions for oil as a transportation fuel.

Moniz was responding to a question from Senate Energy and Natural Resources Committee Chairman Jeff Bingaman (D-NM), who said he was concerned that a world natural gas market would be subject to the volatility and price spikes that characterize the oil market. As it stands now the U.S. market is isolated both by oceans and a different pricing structure. The MIT professor, who holds a chair in physics and engineering systems, said he saw "net advantages" to a global market, but there is a big "if" as to whether it develops.

Moniz said the U.S. should not put restrictions on either the import or export of liquefied natural gas (LNG). A world market would help U.S. allies in Europe, which now have to rely on imports from the Middle East, North Africa and through the Russian pipeline. "It is our view that natural gas is not given the attention it should have in the State Department for U.S. foreign policy."

He also suggested that a world market could substantially lower U.S. prices and imports could gain traction in the years ahead.

Dow Chemical Co. executive George J. Biltz told the committee his company likes the separate U.S. market with prices well below those in Europe and Asia just fine. "It's a distinct competitive advantage" for chemical plants in the U.S., which is better served if the gas is used in this country to make products and the products are exported.

Bingaman and ranking Republican Sen. Lisa Murkowski (R-AK) fired a wide range of questions at Moniz, Biltz and another witness, Howard Gruenspecht, acting administrator of the Energy Information Administration (EIA).

The EIA administrator was asked about a recent New York Times article that insinuated the EIA had used doctored industry reports to come up with their supply estimates, making the development of shale gas look more successful than it actually was (see Daily GPI, June 28).

EIA claimed that statements in the article were wrong and instead of relying on the briefing the agency provided for the Times reporter, the article relied on heavily redacted emails leaked by a low level EIA employee. "We stand behind our shale work," Gruenspecht said.

He said EIA had the unredacted versions of those emails, which showed the comments quoted by the Times had been taken out of context. He agreed to supply them to the committee. He said he had also given copies to a House committee that was investigating. The committee wanted to get to the bottom of the controversy because "we need to know we can rely on the information you give us," Murkowski said.

Questioned about another study, Moniz said he could "not confirm or categorically deny" that the full life cycle emissions of shale gas would be higher than other fuels. He suggested that the government could conduct a study of fugitive emissions for all fuels. He noted, however, that the MIT study showed emissions from a natural gas combined-cycle power plant were less "by a factor of two" than a coal-fired plant.

On the viability of carbon capture and sequestration (CCS), the witnesses saw some future for the process, but Moniz said it would be "extremely expensive" for a coal-fired power plant. In that case capturing the carbon dioxide would be very difficult. Gruenspecht said it would be attractive in enhanced oil recovery, but in power plants "it would be quite challenging."

At some point the U.S. will need CCS, Moniz said, and it would be a good idea to do the groundwork now. He suggested, however, that right now the development of sequestration is more doable.

Biltz said in his last 30 years at Dow this is "at least the third time I've been told an abundance of natural gas would solve all our problems, but it hasn't played out that way in the past couple of experiences. We would be very concerned about assuming natural gas is a silver bullet. We want see policies that take a broad look at supply and demand, and an energy policy that focuses on energy efficiency and developing other energy supply sources."

For Moniz, with a goal of zero carbon, "it would be a huge mistake to lose our focus, first of all on efficiency. Gas is a critical bridge, but it only works if you have very, very strong demand management." Also, the nation should pursue renewables, nuclear power and CCS. "We also believe in the carbon context we cannot stop; there are many challenges," including integrating large-scale wind storage and investigating whether small modular nuclear reactors might be "a game-changer." He also said he was "very bullish on solar energy."

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