Natural Gas — Story and Facts
History, nature, geology and market trends of Natural Gas
Natural gas has been under the surface of the earth for millions of years. It was a subject of various myths and legends related to fire, gods and demons in various ancient cultures. In 500 BC, the Chinese built the world’s first natural gas pipeline using bamboo sticks to transport gas from the grounds where they emerged to the nearby towns and villages. However, its first large scale commercial application started only recently in the beginning of 20th century. The modern advancements in exploration, extraction, storage and transportation techniques were the major steps towards making natural gas an economically viable energy resource. It quickly became the most widely used fuel for heating, electricity generation and manufacture of plastics etc. Up until then, there was manufactured gas which was obtained by burning coal under the conditions of intense heat and absence of oxygen. The manufactured gas (also known simply as coal gas or town gas) was composed of numerous monopolistic organizations which controlled the supply and distribution in their respective regions. Hence, the prices were high and often became the subject of numerous controversies. By 1900s, the manufactured gas companies were no longer the dominant forces in the market, and by 1940s they were almost entirely replaced by utility and natural gas companies.
Natural gas is a colorless, odorless and inflammable fossil fuel that has widespread uses & applications because of its efficiency and comparatively lower carbon emissions to coal and gasoline. It has become one of the main sources of energy, and has been in high demand in both the developed and developing countries. Its deposits are often found very close to the crude oil reservoirs, and can be obtained during oil extraction. The high pressure and high temperatures in the deeper crusts of the earth create an ideal condition for the formation of natural gas. Hence, both quality and quantity of natural gas increases with the depth of its reserve. Its purity varies from place to place, and is obtained in two main varieties, namely — wet gas and dry gas. The dry gas is completely composed of methane (CH4) along with small quantities of impurities like hexane (C6H12), octane (C8H18), helium and nitrogen, and it is well-suited for heating and electricity generation. The wet gas consists of about 85% methane along with impurities like butane and ethane. Hence, the cost of purifying dry gas is lower than that of wet gas. However, the butane (C4H10) and ethane (C2H6) which are extracted from the latter can be useful for other applications. In order to make detection easier during gas leakage, odoring agents like mercaptan are mixed with natural gas and they are characterized by a distinct ‘rotten egg’ like odor.
Natural gases are formed in several different ways. Microorganisms called ‘methanogens’ that thrive in hypoxic (absence of oxygen) conditions can produce it as a metabolic byproduct, and they are found in animal intestines. A process called biological methanation has been developed to produce methane on a large scale with methanogens in an industrial setup, and the gas obtained using this process is known as biogenic gas. The gas that is trapped inside the earth’s crust is called the thermogenic gas. It is a result of decomposition of plant and animal matter inside the earth’s crust under the conditions of intense heat and pressure over a long period of time. Some of it escape to the atmosphere through fissures, or porous rocks, and some remain trapped beneath impermeable layers such as the sedimentary basins. It is also known as conventional gas and is very economical for extraction and production. Large quantities of it is found in Saudi Arabia, Venezuela, and parts of US.
Other forms of natural gas are deemed ‘unconventional’ due to the difficulty of extracting them in an economically viable manner. Bio-gas, which is formed through anaerobic decomposition (in the absence of oxygen), is found in sites like landfills where there is too much organic matter. However, its methane content is too low to that of natural gas. Deep natural gas is found at about 15,000 feet below the Earth’s surface, and requires extensive use of hardware and drilling techniques. Other forms of gases are found in shale formations, which are fine-grained sedimentary rocks that cannot disintegrate in water, and it commonly known as shale gas. The techniques like hydraulic fracturing (known popularly as fracking), and horizontal drilling are used to release the shale gas. It is responsible for a surge in natural gas production during the last decade. Tight gas is distinct from shale gas in that it is trapped beneath impermeable rocks in such a way that it requires extensive use of technology and resources for extraction. Apart from the above mentioned formations, there are coalbed methanes (which are found along with deposits of coal), geopressurized zones (which are at about 10,000 to 25,000 feet below the earth’s surface) and methane hydrates (which are found in ocean sediments and permafrost regions of the Arctic).
The transportation of natural gas is achieved mainly through a dense network of pipelines, but it has to be converted to a liquid form to transport over long distances across the oceans. The process of liquefaction is done in extremely low-temperatures to condense the gas particles into liquid form and the resulting fluid takes about 600 times less space than the gas. The storage and transportation of LNG is done using specialized tankers and storage systems that are maintained at lower temperatures. After it is loaded off at the ports, it goes through a stage of ‘regasification’ to retrieve the gas for transportation through pipelines. The USA has emerged as the world’s leading producer (864 bcm/year) of natural gas, and it now exports LNG to over 25 countries. It is followed by Russia (741 bcm/year) and Iran (232 bcm/year). China (115.5 bcm/year) and Japan (114.2 bcm/year). Germany (85.4 bcm/year) is the largest natural gas importer in Europe, and Mexico (54.3 bcm/year) is the largest importer in the Americas. The demand for natural gas is seasonal in nature since consumers look to buy more gas for heating during the winters. It is a very volatile market which is affected by the market fundamentals and has different parameters based on different regions. Henry Hub in USA, National Balancing Point (NBP) in UK, Title Transfer Facility (TTF) in Netherlands and Japan Korea Market (JKM) in Japan are some of the important hubs for natural gas trading. The standardized commodity contracts for both natural gas and LNG are traded in both spot markets and futures market. However, their prices are linked to that of crude oil in Europe and some parts of Asia. In the last decade, the growing consumer market for LNG has led to the creation of new LNG routes and the rapid diversification of the global LNG market. Also, the entry of several new regions into the LNG market has further intensified the competition.
