The following are excerpts from a paper delivered by Richard Flury, Chief Executive, BP Amaco’s Gas & Power, at Energy Resource 2000, the world's first online energy conference, in association with the World Energy Council, held in May 2000.
Gas is becoming of ever greater importance to the development of world, regional and country economies. The demand is for cleaner, lighter fuels and broader energy solutions within what are rapidly changing and competitive marketplaces.
It is increasingly possible to obtain both economic and environmental benefits from use of natural gas. This trend is expected to accelerate as technology for power generation, space heating, chemicals manufacture and transport continues to advance. Looking into the future, one can now envision an economy powered principally by natural gas.
This “gas economy” would be supplied from a truly global market consisting of large gas reservoirs geographically spread but linked to consumers by low-cost pipelines and/or cheap and scaleable LNG facilities, or possibly through long-distance, high-voltage electricity conduits or large tankers carrying liquid products manufactured from gas.
The chemicals industry would in large part be based on gas feedstock, using gas-to-liquids and/or gas-to-chemicals process technology. Gas could also power the transport sector, first as compressed natural gas (CNG) in applications such as buses and taxis, and later as the primary feedstock for onboard fuel cells.
The technologies for delivering this vision of the gas economy have now largely been invented, but not all have been demonstrated at scale and many technical issues remain to be solved. Nevertheless, implementation of the vision has already started and the rate of market share growth for gas is likely to progress first for heat and power generation, second for gas-to-chemicals and lastly for transport fuels.
BP’s major investments in solar energy, where it is the world's largest producer of photovoltaic panels, signal our belief and commitment to that future. But it is gas that will make the biggest contribution to the developed and developing world we seek to balance the often conflicting aims of growth and environmental performance.
BP believes that natural gas is a key fuel for the future - indeed the fuel of the future that is the fuel of the first decades of the 21st century. Natural gas is abundant, it is available and it is clean burning. In fact it is the cleanest burning fossil fuel. Furthermore estimations believe that there are some 5,000 trillion cubic feet of proven reserves worldwide. But given the fact that , according to him, the oil industry has not really been looking for gas, it is estimated that the 'discovered reserves' significantly underestimate available gas. However, a significant proportion of this gas is currently 'stranded' and will require technological advances and new commercial arrangements to bring it to market.
However It is BP Amoco's view that this infrastructure and technological requirement are now being put in place for a revolution in gas consumption.
Pipelines are bieng builed in a very quick mood , there are plans for lines across central Asia, lines through the Levant and even lines linking Japan with the whole of the Pacific Rim. Probebly that in 20 years' time, there will be few places outside Africa unconnected to major gas provinces.
Meanwhile, the industry is constantly improving its ability to move gas by sea in liquefied form. First shipped in 1971, LNG has overcome initial fears about its safety and its cost is coming down. It is no longer necessary to see the technology in terms of vast expense and 20-year take-or-pay agreements.
Costs are being driven down, capital costs in the industry have fallen by 25 percent since the 1970s, from $300 to $225 a tone.
BP envision a world where smaller and lower-cost LNG regassification facilities are constructed that will see ships making partial deliveries as part of a liquid traded market. Natural gas has overcome its volume-to-thermal-capacity disadvantage and is set to become a truly internationally traded commodity. It is available by sea and by land, not yet universally, but certainly for a large proportion of the planet.
Changing technology
Turbine technology has changed, just as pipeline technology did. This large machine is a state-of-the-art GE H Series turbine that is soon to be installed at our energy park at Baglan Bay in Wales. It is set to perform the four-minute mile of combined-cycle generating efficiency - a thermal efficiency of 60 percent The efficiency of turbines has been radically improved.
Back in 1986 there was only 4,500MW of turbine capacity on order worldwide. A decade later the figure was 29,100MW. Currently the annual market for CCGT technology is around 65,000MW.
In terms of replacing older 35 percent efficient capacity with 60 percent -efficient machines, the CCGT is already making a highly significant contribution to the reduction of greenhouse gas emissions. It is also making sure that new generating capacity is less polluting than it might otherwise have been.
With market liberalization and increasing competition in gas and power markets, one thing is certain. If a single percentage point increase in thermal efficiency saves $15 to $20 million in reduced operating costs over plant lifetime, manufacturers are not going to stop improving it.
The research goes on into ever higher levels of efficiency. The CCGT revolution has only just begun. And so far, only 15 percent of global electricity is generated by gas turbines.
Equally, gas-fired combined heat and power (CHP), which drives overall thermal efficiencies to more than 80 percent, offers a further opportunity for natural gas.
There is a change in industrial client attitudes to energy management. Market deregulation, increased environmental regulation and the trend to outsourcing are growing.
To get the best out of liberalized gas and electricity markets, industrial energy users are turning to companies with expertise in the field of CHP to solve all their energy management problems.
Companies such as BP Energy effectively remove the complexity of steam and power provision. This allows customers to get on with what they do best. CHP capacity has also been growing rapidly as a result.
But the ability of natural gas to change the landscape of fuel pollution does not stop with power generation. Owing to its singular role as the simplest hydrocarbon, methane can be turned into liquid hydrocarbons that contain fewer polluting elements. There are two fundamentally different approaches to this, both produced via a syngas phase. The Fischer Tropsch process produces syncrude, while the oxygenate route produces methanol, dimethyl ether (DME) and dimethoxymethane (DMM). Both these routes offer a new role for natural gas.
The syncrude produced by the Fischer Tropsch process is highly valued for diesel blending and sells at a premium of 30-40 percent over crude itself. Methanol, DME and DMM are also valuable.
The key to the gas-to-liquids process is really creating syngas, which accounts for 60 percent of the costs of the whole process. By mixing methane with oxygen via a catalyst, hydrogen and flammable carbon monoxide are produced. BP Amoco is involved in a research programme with Phillips, Statoil, Praxair and Sasol. This is focused on reducing the cost of syngas production by 20-30 percent, which can be done.
DME and DMM offer the chance of more environmentally friendly diesel. Methanol can be burnt direct in vehicles or as a fuel for fuel cells.
Of course, natural gas is currently in use in motor vehicles as either compressed natural gas (CNG) or LNG. This a growing market, notably in Egypt where thiere is a significant transport fuel sector based on natural gas, and countries with high levels of urban pollution.
In conclusion
Natural gas is a clean-burning fuel, which is already a major force - through the power sector - in cutting down on carbon dioxide emissions. Pipelines and LNG plants have reached the point where gas can be delivered around the world. Liberalization has opened up the power and gas markets. Gas-to-liquids is close to economic viability.
In short, if you want to think about a pre-eminent fuel in the early decades of the 21st century, it just has to be natural gas.
© 2000 Mena Report (www.menareport.com)
