July 2016, Vol. 243, No. 7
Features
The Unlimited Potential for Natural Gas
The energy industry cannot underestimate the promise and potential of natural gas. Successful natural gas development in emerging markets – where the gas resources are abundant – could spur economic growth and improve living standards.
As emerging economies look to be part of the gas opportunity value chain, we must ask ourselves what it takes to be successful.
Regions like Africa, Latin America, and parts of Asia share a unique set of challenges in the quest to meet energy demand through natural gas. They have limited infrastructure, fewer regulatory and contractual frameworks, and a less mature utilities and service industry than in developed economies.
Some of these regions are starving for electricity. Globally, there are approximately 1.2 billion people – 17% of the global population – who lack access to power, according to the International Energy Agency (IEA). Many more endure an electricity supply grid that is simply unreliable. More than 95% of these people are either in Sub-Saharan Africa or developing Asia.
At the same time, more than 2.7 billion people, or 38% of the world’s population, are estimated to use solid biomass such as wood for cooking. Developing Asia and sub-Saharan Africa once again have the lion’s share of the world’s total.
During the next two decades, the demand for energy will continue to rise, driven by demographics and infrastructure development. The global middle class is expected to double to nearly 5 billion, which means twice as many people will need fuels for heating, mobility and manufacturing. The world is going to need all forms of energy, and crude oil and natural gas are indispensable to match this energy equation.
Amid this urgency for reliable and affordable energy, it’s imperative to build the infrastructure necessary to use natural gas in the developing world. Natural gas is an abundant, cleaner-burning fossil fuel that is economical to produce and commercialize; complementary to renewables, such as solar, wind or hydropower; and increasingly being used in transportation vehicles.
More important for emerging economies, natural gas is an economic environmentally acceptable fuel for generating electricity. Universal access to electricity, according to IAE, is expected to be attained in the Middle East, Latin America, and Asia by 2030 while growth will continue in Sub-Saharan Africa. Better infrastructure for the utilization of regional natural gas supplies could increase access to electricity and contribute to this transformation
The development of the natural gas industry stimulates local economies via domestic consumption and creates significant foreign revenue from exports and foreign direct investment. Leadership and partnerships could play a major role in overcoming hurdles to achieve these goals.
Governments need to offer energy and utility companies the right incentives to look at the entire natural gas value chain. For example, the contract terms for natural gas producers need to be internationally competitive so companies will increase their investment and, consequently, their production.
Policies should also incentivize the investment in much-needed infrastructure, the muscle and bone of modern economies. For example, the existing power distribution infrastructure in Sub-Saharan Africa, including pipelines and power-generation plants, is often not available, reliable or sufficient.
Additionally, many major private investors are waiting to see if governments can establish policies that can boost political and regulatory stability.
Gas-rich nations, such as Nigeria and Angola, have taken significant steps to better use their resources. Through the investment of billions of dollars, large oil-and-gas producers have sharply reduced routine flaring of natural gas that is extracted along with crude oil – known as associated natural gas. Chevron, one of the largest oil and gas producers in Nigeria, has reduced routine gas flaring by more than 90% from 2008 to 2016.
Despite steps like this, there is still work to be done to increase domestic use of natural gas in West Africa and other emerging markets.
Government, industry and private investors – all of us – must take every opportunity to efficiently convert natural gas resources into valuable fuel for generating electricity. Providing reliable energy can create sustainable expansion of the emerging economies. This will be vital for driving the future economic transformation of the developing world and support for the global economy.
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