The Two Biggest Threats To The Natural-Gas Boom

Flames from a flaring pit near a well in the Bakken Oil Field. The primary component of natural gas… [+] is methane, which is odorless when it comes directly out of the gas well. In addition to methane, natural gas typically contains other hydrocarbons such as ethane, propane, butane, and pentanes. Raw natural gas may also contain water vapor, hydrogen sulfide (H2S), carbon dioxide, helium, nitrogen, and other compounds, according to earthworksaction.org. (Photo by Orjan F. Ellingvag/Corbis via Getty Images)
The International Energy Agency is bullish on the prospects for natural gas. IEA sees gas as a versatile player with vast growth potential, in large part because it can solve local air pollution in Asian cities. But IEA Executive Director Fatih Birol warned last week that two threats could derail the growth of the natural gas industry.
"We think gas has a bright future, but there are two major risks for gas, that it will not grow as much as we expect," Birol said in an appearance last week at the Brookings Institution.
The two threats are:
1 Renewables: If gas becomes more expensive than solar and wind energy—which could happen because of international price shocks—it could lose much of its foothold. If the price of gas remains close to renewables, it should thrive, Birol said.
"If it stays affordable there will be huge demand, especially in Asia," he said. "There is one big advantage of natural gas and it is the reason why in Asia it is going strong. Namely, local pollution."
"Today in many countries they use gas in order to reduce the local pollution in the cities, SO2, NOx, and particulate matter. It’s a major issue. It’s a big benefit for gas, vis-a-vis coal.”
2. Methane Leaks: But as climate change worsens, countries will be hobbled in their efforts to deploy natural gas if the infrastructure remains as leaky as it is today. "We are seeing that a significant amount of methane is leaked to the atmosphere through the production and transportation of gas," Birol said.
Indeed, a recent study of the U.S. gas industry found that methane leaks may be 60 percent higher than the Environmental Protection Agency has estimated.
More after the jump:
"If the gas industry cannot address this methane issue," Birol said, it will come home to roost and, out of necessity, limit the industry's growth.
The IEA contends that methane leaks can be fixed with existing technology, and that half of methane leaks can be repaired at no cost to the industry. The agency recommends using non-permeable pipe whenever possible, with fewer joints between sections of pipe. The expense is offset by the value of the gas that's retained.
"This is major homework for the gas industry. They have to make sure prices don’t go up too much, and second, address the methane issue," Birol said. "We assume they will take the decisions in the right way."