Sheila McNulty Natural gas focus of oil conference, pointing to source of future

For years, the so-called Oil Day of the annual IHS CERA energy conference, which draws thousands of industry executives to Houston, has been the highlight of this weeklong event. It comes first – before Gas Day and Power Day. The biggest names are keynote speakers that day (This year, for example, Steven Chu, US Secretary of Energy, was among the keynote speakers). And attendence is at its highest.

But the irony of how natural gas is beginning to overtake oil in importance to the industry was underscored by the lunchtime keynote speaker Jim Mulva, chief executive of ConocoPhillips, the third biggest US oil and gas company. Even though Conoco is an oil company first and foremost, and Mr Mulva was speaking on Oil Day to a room filled with oil executives, his speech was called Natural Gas – The Gift.

He noted that if oil has long been considered the prize for the industry, then natural gas is now the gift in a world in which carbon-based fuels, though in cleaner forms, must keep carrying the world’s energy load. In his own words:

Renewables just cannot ramp up fast enough to replace them. But where will this energy come from? Fortunately, Mother Nature, human ingenuity and technology have provided the answer. That is, if we are allowed to unwrap the gift…But we face two big obstacles in delivering the gift of natural gas. We must overcome the opposition of the hydrocarbon deniers. And government must find the political will to address long-term energy needs pragmatically.

He noted, however, that the US government is proposing higher taxes on the natural gas industry and tigthtening resource access even as it mandates use of renewable energy for electricity generation. Mr Mulva said wind and solar power have their own problems – cost, reliability, visual impact, land and water use, bird strikes and massive powerline rights of way. In addition, current-generation biofuels require a lot of land and water, impact food prices, can increase greenhouse gas emissions, are vulnerable to crop failure, and require subsidies. Coal is carbon intensive. Nuclear faces wate dispoosal, proliferation and public acceptance issues.

So let’s look realistically at the objections to natural gas….Development requires a small land-use footprint. It’s only 1/20th that of equivalent wind or solar power. Gas-fired combined-cycle power plants have low water consumption, particularly compared to some renewable sources. Yes, gas is carbon-based. But it burns cleanly and produces practically no nitrogen oxide, sulfur dioxide or particulates. So there is less threat of acid rain and smog. In terms of climate change, gas-fired pwoer plants produce half the carbon dioxide of coal-fired units…Substituting gas for other fuels is the fastest and most cost-effective way to reduce greenhouse gas emissions.

Mr Mulva noted that the US has found new ways to access natural gas from shale rock after years of declining production. This has led to a boom, with estimates that the country has 100 years of supply, at current usage rates, versus 30 years supply forecast just several years ago. As the US tries to improve its energy security and clean up its emissions, this gas boom could not have come at a better time. It is certainly a gift to oil companies struggling to find new reserves in a world of intense energy resource nationalism, increasing concerns about peak oil and a move away from high carbon fuels. And that is why the room filled with executives at CERAWEEK to talk about oil were perfectly content to listen to a keynote speech about natural gas.