Energy from Natural Gas
Natural gas is a high energy, highly desirable fuel source that is also, among the fossil fuels, the cleanest burning. As well as being an important heating and process fuel for homes and industry, it is also the feedstock for manufacturing chemicals and fertilizers. The U.S. chemical industry uses 11% of the natural gas consumed domestically as feedstock and as energy to run its plants. Natural gas costs account for 70-80% of the cost of fertilizers. In addition, the largest component of natural gas, methane, will be a major source of hydrogen for power sources using hydrogen, but it is not known what the impact on demand for natural gas will be.
There are strong indications that the United States' natural gas supply is headed toward a crisis. Domestic supplies are declining while demand is rising. Currently natural gas consumption exceeds production by 3.5 billion cubic feet per year. Shortages in natural gas are driving prices higher, with the prices subject to the same volatility that afflicts the oil industry.
The demand is being driven primarily by new natural gas electricity generation plants coming online. Electricity generation is expected to be the key driver of natural gas demand over the next decade, ultimately surpassing all other uses.
The decline in supply is being driven by the decline in natural gas well productivity, falling from a domestic peak of 435,000 cubic feet per day (cf/day) per well in 1971 to 120,000 cf/day in 2005. Moreover, newer wells are depleting at a much higher rate than those drilled just a few years ago. Pennsylvania and West Virginia are home to many of the depleted fields.
Much like oil, the gap between demand and supply of natural gas is being filled by imports from countries in politically unstable parts of the world, with the percentage of imported gas increasing fourfold in the past 20 years (4.2% in 1986 to 15.9% in 2005).
Domestic coal bed methane will be a part of the solution. Northern Appalachia holds about 9% of the national coal bed methane reserves, an amount comparable to Pennsylvania's natural gas reserves. The Three Rivers Region currently contributes about 5% of the national coal bed methane supply. CONSOL, headquartered in the region, is investing heavily is developing new coal bed methane sources.
West Virginia produces about 1% of the nation's natural gas supply out of 49,000 wells located in 49 of West Virginia's 55 counties. But it consumes only about 0.5% of the national total (with industry being the biggest customer), leaving 54% of its gas production available to export to Virginia and the northeastern U.S. West Virginia's natural gas reserves represent only about 2% of the U.S. reserves, but they are twice the reserves of Pennsylvania, fourteen times those of New York, and the only reserves of consequence in the eastern U.S. Advanced gas recovery techniques (e.g., pumping water into the wells) are being used to help boost gas production as the reserves are declining and gas becomes tougher to capture.
In contrast, Pennsylvania imports 76% of its natural gas supply, with demand driven primarily by residential demand.
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©2007 Janet S. Lauer Consulting. All rights reserved.