Global Gas Projections: the Potential Impact of Unconventional Gas Production in the
United States and China Dr Brian Fisher
Presenta.on to the Global Energy Technology Strategy Program Workshop:
Abundant Gas, HyaC Regency, Cambridge MD, April 15-‐17, 2013
Economic assessment of the impact of increased gas production
Purpose of the analysis: The analysis seeks to estimate the affect of increased gas production globally and on both the
United States and China
Purpose and contents of the analysis
1 • Background
2 • Modelling framework
3 • Modelling assumptions
4 • Business as Usual projections
5 • Scenario comparisons
6 • Conclusions
Contents:
Background
World natural gas reserves are large enough to meet 230 years of demand at currently projected rates of use
World natural gas reserves: remaining recoverable resources (2011; tcm)
Source: IEA (2012) ‘World Energy Outlook’.
§ World natural gas reserves estimated to be 790 tcm (53 per cent conventional; 47 per cent unconventional) § Enough to meet at least 100 years of demand (world gas production in2011 was 3.28bcm). § Current largest consumers: United States (21 per cent) Russia (14 per cent), Iran (4 per cent), and China (3 per cent). § Gas accounts for 21 per cent of the global primary energy demand, after oil and coal. § Role of a short-‐term ‘bridge fuel’ and potential to displace coal in electricity generation and reduce emissions. § Asia-‐ Pacific and North-‐America account for almost half of the world unconventional gas reserves.
North America and China have the largest unconventional gas resources
Remaining recoverable resources by type – 15 leading countries
§ Nearly half of the world natural’s gas reserves are from abundant unconventional recoverable resources: shale gas (200 tcm); tight gas (81 tcm); coal seam gas (47 tcm).
§ The two largest holders of remaining resources of unconventional gas, are China and the United States, and the two account for approximately 45 per cent of the world’s unconventional gas resource.
§ Production of unconventional gas is more energy-‐intensive and requires more infrastructure, venting or flaring, and the construction of more wells for the same quantity produced.
§ Due to environmental concerns and cost the extraction, unconventional gas production remains limited in most regions.
Source: IEA (2012). ‘Golden Rules for a Golden Age of Gas’, World Energy Outlook Special Report on UnconvenGonal Gas.
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Source: IEA (2012) ‘WEO’. New policies scenario: current policies are maintained and new policy commitments are included.
Inter-‐regional trade is expanding via both pipeline and LNG transport networks
Projected natural gas trade movements (bcm)
§ At present, most of the trade occurring is via pipelines. § By 2030-‐35, inter-‐regional trade is expected to increase by 80 per cent, faster than demand (50 per cent). § Over the same period, the share of LNG in inter-‐regional trade is forecasted to reach 50 per cent, currently 30 per cent. § New production sites, competition between and within countries, and trade flows taking new directions. § Both existing pipeline transport networks and LNG trade are expected to expand.
Modelling framework
Modelling framework for BAEGEMv2
• BAEGEMv2 is a dynamic multi-‐region, multi-‐sector computable general equilibrium (CGE) model developed by BAEconomics.
• BAEGEMv2 is capable of simulating economic scenarios over a long time horizon. Each time step in BAEGEMv2 is one year.
• Demand for commodities in the model is determined by the social accounting matrices of the modelling regions, the prevailing economic conditions and policy settings.
• The BAEGEMv2 database is based on various sources. The core database is based on the GTAP v8 database with a base year of 2007. The GTAP v8 database covers 129 countries/regions across the world and 57 commodity groups.
• BAEGEMv2 expands the GTAP commodity groups to 71, including black coal, brown coal, coking coal, iron ore, bauxite, copper ore, uranium, gold, titanium, zirconium, alumina, coke, nuclear fuel, aluminium and copper.
• For the ease of simulation, the BAEGEMv2 database was aggregated into 13 economies and 23 commodities for this application.
1. United States 8. Japan, Korea and Taiwan
2. Canada 9. Australia
3. EU27 10. Rest of Asia
4. Russia 11. Central and South America
5. Rest of Europe 12. Middle East and North Africa
6. China 13. Sub-‐Saharan Africa
7. India
In BAEGEMv2 the world is divided into 13 economies for this research
1. Thermal Coal 13. Forestry and Fishing
2. Coking Coal 14. Processed Food
3. Oil 15. Chemicals, rubber and plastic
4. Gas 16. Non-‐metallic minerals
5. Electricity 17. Iron and Steel
6. Nuclear fuel 18. Non-‐ferrous metal
7. Petroleum fuel 19. Other Manufacturing
8. Coke 20. Construction
9. Iron Ore 21. Land transport
10. Other metallic minerals 22. Water and Air Transport
11. Crops 23. Services
12. Livestock
In BAEGEMv2 each economy is divided into 23 production sectors for this research
Modelling assumptions
United States China
1. Real GDP
• Real GDP grows by an average of 2.6 per cent a year from 2011 to 2020, slowing to 2.3 per cent a year from 2021 to 2035 and 2.0 per cent a year from 2036 to 2050.
• Real GDP grows by an average of 7.5 per cent a year from 2011 to 2020, slowing to 4.5 per cent a year from 2021 to 2035 and 2.7 per cent a year from 2036 to 2050.
2. Popula8on
• Grows by an average of 0.8 per cent a year from 2011 to 2020, slowing 0.7 per cent a year from 2021 to 2035 and 0.5 per cent a year from 2036 to 2050. United States popula.on reaches 403 million by 2050.
• China popula.on peaks at 1.4 billion in 2025 and falls to 1.3 billion by 2050.
3. Renewable and CCS technologies
• Moderate improvement in unit genera.on costs with unit genera.on costs remaining higher than fossil fuel technologies by 2050. CCS technology is not commercially viable before 2050.
4. GHG mi8ga8on policy • No post-‐Kyoto interna.onal agreement on greenhouse gas mi.ga.on is implemented by 2050.
Two illustrative scenarios are developed for this exercise
Two scenarios, the central gas case and the abundant gas scenarios, are developed in this exercise to illustrate the implications of increased gas production in China and the United States from 2013 to 2050, in which no post-‐Kyoto international agreement on greenhouse gas mitigation is implemented.
Central gas case Abundant gas
1. Energy policy • Reference case • Domes.c energy policies in China and the United States are strongly oriented toward increasing natural gas produc.on.
2. Technology progress in gas produc8on
• Reference case with small addi.onal gas produc.on in the United States
• Technological progress in the United States and China gas sectors is faster, increasing produc.vity and reducing produc.on costs of conven.onal and unconven.onal gas in both countries.
• Produc.vity increases 0.15 per cent a year faster in the United States gas sector and 0.2 per cent faster a year in the Chinese gas sector.
Additional assumptions
The central gas case and the abundant gas scenarios share some common assumptions but there are differences in the following areas.
Projections for the central gas case
Global GDP growth is driven by developing economies
• The world real GDP is projected to grow by an average of 3.2 per cent a year from 2011 to 2020, slowing to 2.9 per cent a year from 2021 to 2035 and 2.4 per cent a year from 2036 to 2050.
• Developing economies, particularly China and India, continue to grow faster than developed economies. • China is projected to grow considerably slower from the mid-‐2020s. • United States is assumed to have moderate population growth between 2011-‐50.
Average annual GDP growth rate
0
1
2
3
4
5
6
7
8
USA EU27 Russia China India JKT Australia Rest of Asia MENA
Per cent
2011-‐20 2021-‐35 2036-‐50
Developing economies will drive global population growth
• The world population is assumed to grow by an average of 1.1 per cent a year from 2011 to 2020, slowing 0.8 per cent a year from 2021 to 2035 and 0.5 per cent a year from 2036 to 2050. The world population reaches 9.3 billion by 2050.
• China’s population is assumed to peak in around 2025. • India is expected to overtake China as the most populous country in 2021. • Developing economies, particularly those in Africa and Asia, will drive global population growth to 2050. • Most developed economies will continue to exhibit some population growth, but at lower levels than developing economies.
Average annual population growth rate
-‐1
-‐0.5
0
0.5
1
1.5
2
USA EU27 Russia China India JKT Australia Rest of Asia
MENA
Per cent
2011-‐20 2021-‐35 2036-‐50
Global gas production is driven by the Middle East, United States and Russia
• Global gas production is projected to grow to approximately 4250 bcm by 2030 and to 5050 bcm by 2050. • Whilst most regions will experience an increase in natural gas production, EU27 production is assumed to decline.
Gas production – central gas case
0
200
400
600
800
1,000
1,200
1,400
1,600
2013 2018 2023 2028 2033 2038 2043 2048
bcm All regions
USA EU27 Russia China
India MENA Rest of Asia Australia
0
1,000
2,000
3,000
4,000
5,000
6,000
2013 2018 2023 2028 2033 2038 2043 2048
bcm World total
Global greenhouse gas emissions are projected to grow strongly to 2050
Greenhouse gas emissions – central gas case
• Without a post-‐Kyoto international agreement, global greenhouse emissions (CO2 equivalent terms) are projected to grow strongly to 2050.
• Developing economies such as China, India, the Middle East and North Africa are the main drivers of this emissions growth. • China is the largest emitter of greenhouse gases. This is driven by the large share of coal in the fuel mix.
0
2
4
6
8
10
12
14
16
18
2013 2018 2023 2028 2033 2038 2043 2048
Gt CO2-‐e All regions
USA EU27 Russia China
India JKT MENA Australia
20
25
30
35
40
45
50
55
60
65
2013 2018 2023 2028 2033 2038 2043 2048
Gt CO2-‐e World total
Coal remains the dominant fuel in the global electricity technology mix
World technology mix in electricity – central gas case
• Coal is currently the dominant fuel in the global energy mix. • Gas accounts for approximately a quarter of global electricity generation, though this is projected to steadily increase t0 32 per
cent by 2050. • The hydro and nuclear share of global electricity generation are projected to remain at approximately 14 per cent and 11 per
cent respectively.
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
2013 2018 2023 2028 2033 2038 2043 2048
TWh
Coal Oil Gas Nuclear Hydro Wind Solar, Biomass & Others
14%
34%
11%
32%
Coal remains the dominant fuel in the electricity generation mix in both the United States and China
Technology mix in electricity in the United States and China – central gas case
• Gas currently accounts for a quarter of United States’ electricity generation • Coal is the dominant fuel for electricity generation in China. Gas has the third largest share, behind hydro, but is relatively
insignificant compared with coal. • The share of gas in both countries’ fuel mix is projected to increase steadily
0
10
20
30
40
50
60
70
80
2013 2018 2023 2028 2033 2038 2043 2048
Per cent
United States
Coal Gas Nuclear Hydro Renewables
0
10
20
30
40
50
60
70
80
2013 2018 2023 2028 2033 2038 2043 2048
Per cent
China
Coal Gas Nuclear Hydro Renewables
Scenario comparisons
Gas production increases in both the United States and China in the abundant gas scenario
Gas production in the United States and China – abundant gas scenario
• In 2030, United States gas production is around 20 per cent higher under the abundant gas scenario compared with the central gas case. Most of the increase comes from shale gas production. By 2050 total gas production in the United States is around 40 per cent higher under the abundant gas scenario.
• In 2030, China gas production is around 60 per cent higher under the abundant gas scenario compared with the central gas case. By 2050 it is around 120 per cent higher.
0
200
400
600
800
1,000
1,200
1,400
1,600
2013 2018 2023 2028 2033 2038 2043 2048
bcm
United States gas production
Reference case Alternative scenario
0
200
400
600
800
1,000
1,200
2013 2018 2023 2028 2033 2038 2043 2048
bcm
Chinese gas production
Reference case Alternative scenario Central gas case
Abundant gas scenario
Central gas case
Abundant gas scenario
CAGR 2011-‐2020 CAGR 2021-‐2035 CAGR 2036-‐2050
United States (Central) 1.97 0.83 0.64
(Abundant) 2.52 1.71 1.70
EU27 -‐0.22 -‐1.26 -‐2.61
Russia 1.41 0.15 -‐0.80
China (Central) 7.08 3.85 1.61
(Abundant) 8.67 6.28 3.14
India 3.47 1.61 -‐0.10
MENA 1.76 2.30 1.75
Rest of Asia 1.01 0.80 0.41
Australia 3.21 2.95 0.01
Production growth rates
• In the abundant gas scenario, United States’ production reaches 960 bcm in 2030 and 1320 bcm in 2050. • China’s gas production reaches 490 bcm in 2030 and 940 bcm in 2050 in the abundant gas scenario.
Coal is the main fuel displaced by the increased gas share in the electricity mix
Coal production in the USA and China – comparison of scenarios
• Coal is the main fuel displaced by the increased shale gas production under the abundant gas scenario • Thermal coal is not the only fuel displaced in the electricity sector, nuclear and renewables are also displaced to some extent. • Coal production in the United States in 2050 is 30 per cent lower under the abundant gas scenario. • Coal production in China in 2050 is 17 per cent lower under the abundant gas scenario.
0
100
200
300
400
500
600
2013 2018 2023 2028 2033 2038 2043 2048
mtoe
US coal production
Reference Alternative Abundant gas scenario
Central gas case
0
500
1,000
1,500
2,000
2,500
3,000
2013 2018 2023 2028 2033 2038 2043 2048
mtoe
China coal production
Reference Alternative Abundant
gas scenario Central gas case
Increased gas production results in a growth of electricity generated by gas technology in both the United States and China
Share of electricity generated by gas technology – comparison of scenarios
• The additional gas production in both countries is accompanied by an increase in the share of gas in the electricity fuel mix.
0
10
20
30
40
50
60
2013 2018 2023 2028 2033 2038 2043 2048
Per cent
United States
Reference Alternative Abundant gas scenario
Central gas case
0
10
20
30
40
50
60
2013 2018 2023 2028 2033 2038 2043 2048
Per cent
China
Reference Alternative Abundant gas scenario
Central gas case
Enhanced gas production reduces greenhouse gas emissions in both the United States and China to a limited extent
Greenhouse gas emissions in the United States and China – comparison of scenarios
• United States greenhouse gas emissions are 2 per cent lower in 2030 and 2.5 per cent lower in 2050 under the abundant gas scenario. • China’s greenhouse emissions are 2.5 per cent lower in 2030 and 4.5 per cent lower in 2050.
0
2
4
6
8
10
12
14
16
2013 2018 2023 2028 2033 2038 2043 2048
Gt CO2-‐e
United States greenhouse gas emissions
Reference case Alternative scenario High Gas
0
2
4
6
8
10
12
14
16
2013 2018 2023 2028 2033 2038 2043 2048
Gt CO2-‐e
Chinese greenhouse gas emissions
Reference case Alternative scenario High Gas Central gas case
Abundant gas scenario
Abundant gas scenario
Central gas case
Global greenhouse gas emissions exhibit strong growth, in both scenarios
• In either scenario, global greenhouse emissions grow strongly. • Global greenhouse emissions in the abundant gas scenario are 1 per cent lower in 2030 and 1.5 per cent lower in 2050. • Therefore, the large increase in gas production in the United and China does little to curb greenhouse gas emissions on a global
level.
Global greenhouse gas emissions
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
2013 2018 2023 2028 2033 2038 2043 2048
Reference Case Alternative scenario Abundant gas scenario
Central gas case
Gt CO2-‐e
