Natural Gas

41 needs cheap, domestic and reliable energy resources. Therefore, China intensively uses the coal especially in electricity production. Apart from China, the demand of developing countries is expected to grow and the share of them will reach to 80 % by the year 2035. In contrast to Asian countries, IEA does not estimate any demand increase for OECD countries. Because of the heavy working regulations and environmental concern, OECD countries preferred the natural gas and renewable energy instead of coal (IEA, 2012).

When we look at the sectorial distribution of global demand for coal, we see that 65 % of the demand for coal comes from the electricity generation. The main demand of coal comes from the electricity sector, because today nearly 41 % of global electricity is produced from the coal. Two countries, China and USA, produce 62 % of world’s coal-based electricity generation (IEA, 2012). The coal will protect its dominant position in the electricity generation in the near future.

Because of the global warming and climate changes, today the countries have been trying to obtain clean energy from coal. In this context, in addition to construction of the high efficient and low emission coal power plants, liquid fuels from coal and gasification studies are ongoing. South Africa obtains 160.000 barrel liquid fuel from coal by using the converting coal to a liquid fuel (CTL) technology. Currently, the country meets nearly 30

% of gasoline and diesel needs from liquid fuels derived from domestic coal. Liquid fuel not only protects the country from the effects of sudden price changes of crude oil but also protects the environment because dimethyl ether (DME), liquid fuels of coal, is a non-toxic and non-carcinogenic fuel and create less carbon monoxide than LPG (WEC, 2013).

Therefore, the biggest demand grow, 8.2 % per year, is estimated in this field and if a country has appropriate domestic coal supply, IEA recommends application of CTL and underground coal gasification process to that country.

42 of natural gas increased rapidly especially after World War II. While the share of natural gas in the total energy consumption was less than 10 % in 1950s, with the help of power generations and economic developments, the share of natural gas reached to 24 % in 2012 and became the third most used energy resources after oil and coal in global economy.

The average demand increase rate of natural gas is bigger than other fossil based energy resources. According to the IEA estimation, the average annual demand growth ratio of the natural gas will be 1.6 % between the 2010 and 2035 time period. The main reason of this increase is the widespread usage of the natural gas in the electricity generation. Another important reason is the economic growth and environmental concern of the developed country. Since natural gas’ emission is less than coal, it is widely preferred by developed countries for building, heating and industry.

Proven natural gas reserves were 185.7 trillion cubic meter (tcm) at the end of the 2013 in the world. Nearly 80.5 tcm of natural gas is located in Middle East and the share of Middle East is 43.2 % in total reserves. Iran has the biggest reserves with the 33.2 tcm and 18 % share in the world and Russia and Qatar follow it with 17 % and 13.4 % share respectively (BP, 2013). The reserve quantity and share of other regions are shown in figure 2.

Figure 2: World Conventional Proved Natural Gas Reserves by Region in 2013 (tcm)

Middle East Europe/Eurasia Asia Pacific Africa N. America M&S America

Resource: BP Statistical Review of World Energy, June 2013

According to the current reserve and consumption level, the life of natural gas is estimated around the 56 years (BP, 2013). However, IEA assumes that theoretically the natural gas

43 reserves can be increased to 790 tcm and this amount will be sufficient to meet the natural gas demand of the world at about 230 years (IEA, 2012:134). Like being in the oil sector, the shale gas revolution of the USA affected the energy market deeply and changed the predictions about the future of the natural gas. With the help of the shale gas, USA became the biggest producer and took 20.4 % share in global market. Another high production increase was realized as 12.6 % in Norway, 7.8 % in Qatar, 11.1 % in Saudi Arabian in 2012 (WEC, 2013).

World producible shale gas reserve is almost 7.8 trillion feet cubic (ftc) as of 2012 and nearly 1.16 ftc of this reserve is located in USA, 1.11 ftc in China and 0.8 ftc in Argentina.

Today, it is planned to obtain natural gas from shale gas, coal bed methane and tight sandstone gas reserves in many parts of the world. When the countries, which have shale gas reserves, start the production of this gas, the global energy outlook will be quite different from that of todays and these developments will have significant economic and geopolitical consequences in the world. Hence, parallel to these developments, it is calculated that approximately half of the production increase of natural gas will be provided from non-conventional natural gas resources, e.g. the shale gas (WEC, 2013).

Table 8: Remaining Technically Recoverable Natural Gas Resources by Type and Region Conventional Non-Conventional Total

Tight Gas

Shale Gas

Coal bed Methane

Europe/Eurasia 144 11 12 20 187

Middle East 125 9 4 - 137

Asia Pacific 43 21 57 16 137

OECD Americas 47 11 47 9 114

Africa 49 10 30 - 88

Latin America 32 15 33 - 80

OECD Europe 24 4 16 2 46

World 462 81 200 47 790

Resource: World Energy Outlook 2012, IEA

Environmental policies to reduce carbon emissions in the world have led to the strengthening of natural gas against to coal and other fossil based resources. Therefore, although it is below the historical average growth rate of 2.7 %, the world natural gas consumption growth was realized as 2.2 % in 2012. (WEC, 2013: 78).

44 Table 9: Natural Gas Demand by Region in the New Policies Scenario (bcm)

New Policies 2010-2035 1990 2010 2020 2035 Amount

Growth

Annual Growth Rate

OECD 1.036 1.597 1.731 1.937 341 0.8 %

Americas 628 845 940 1.032 187 0.8 %

Europe 325 569 585 669 100 0.7 %

Asia Ocenia 82 182 206 236 53 1.0 %

Non-OECD 1.003 1.710 2.213 3.018 1.348 2.3 %

Europe/Eurasia 737 692 747 842 150 0.8 %

Asia 84 393 660 1.111 717 4.2 %

Middle East 87 376 485 640 264 2.1 %

Latin America 60 146 182 249 103 2.2 %

Africa 35 103 139 176 73 2.2 %

World 2.039 3.307 3.943 4.955 1.648 1.6 % Share of Non-OECD 49 % 52 % 56 % 61 %

Resource: World Energy Outlook, IEA, 2012

From the sectorial point of view, the most important area that supports the natural gas demand is the electricity generation. Due to the fact that natural gas can be burned with high efficiency and having less greenhouse emission effects comparing to the other fossil based fuels, it is widely preferred as a cheap and safe alternative in power generation.

Therefore, regardless of the how policies develop, the power sector will remain the pioneer of the natural gas demand in many regions. As a result, the demand of power sector is expected to increase 40 % (1.6 % per year) between the 2011 and 2035 (IEA, 2012: 132).

Apart from power sector, the building sectors’ demand will also be strong with the help of the environmental concern.