The Future of Natural Gas

An Interdisciplinary MIT Study

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Press briefing.

The Future of Natural Gas is the fourth in a series of MIT multidisciplinary reports examining the role of various energy sources that may be important for meeting future demand under carbon dioxide emissions constraints. In each case, we explore the steps needed to enable competitiveness in a future marketplace conditioned by a CO2 emissions price. Often overlooked in past debates about the future of energy in the U.S., natural gas is finding its place at the heart of the energy discussion. Natural gas is a major fuel for multiple end uses — electricity, industry, heating — and is increasingly discussed as a potential pathway to reduced oil dependence for transportation. In addition, the realization over the last few years that the producible unconventional gas resource in the U.S. is very large has intensified the discussion about natural gas as a "bridge" to a low-carbon future.

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Introduction

Despite its vital importance to the national economy, natural gas has often been overlooked, or at best taken for granted, in the debate about the future of energy in the U.S. Over the past two or three years, this has started to change, and natural gas is finding its place at the heart of the energy discussion.

There are a number of reasons for this shift. The recent emergence of substantial new sup- plies of natural gas in the U.S., primarily as a result of the remarkable speed and scale of shale gas development, has heightened awareness of natural gas as a key component of indigenous energy supply and lowered prices well below recent expectations. Instead of the anticipated growth of natural gas imports, the scale of domes- tic production has led producers to seek new markets for natural gas, such as an expanded role in transportation. Most importantly for this study, there has been a growing recognition that the low carbon content of natural gas relative to other fossil fuels could allow it to play a signifi- cant role in reducing carbon dioxide (CO2) emis- sions, acting as a "bridge" to a low-carbon future.

Within this context, the MIT study of The Future of Natural Gas seeks to inform the discussion around natural gas by addressing a fundamental question: what is the role of natural gas in a carbon-constrained economy?

In exploring this question, we seek to improve general understanding of natural gas, and examine a number of specific issues. How much natural gas is there in the world, how expensive is it to develop, and at what rate can it be produced? We start from a global perspective, and then look in detail at U.S. natural gas resources, paying particular attention to the extent and cost of shale gas resources, and whether these sup- plies can be developed and produced in an environmentally sound manner.

Having explored supply volumes and costs, we use integrated models to examine the role that natural gas could play in the energy system under different carbon-constraining mechanisms or policies. It is important to recognize that the study does not set out to make predictions or forecasts of the likelihood or direction of CO2 policy in the U.S. Rather, we examine a number of different scenarios and explore their possible impacts on the future of natural gas supply and demand.

Natural gas is important in many sectors of the economy — for electricity generation, as an industrial heat source and chemical feedstock, and for water and space heating in residential and commercial buildings. Natural gas competes directly with other energy inputs in these sectors. But it is in the electric power sector — where natural gas competes with coal, nuclear, hydro, wind and solar — that inter-fuel competition is most intense. We have, therefore, explored in depth how natural gas performs in the electric power sector under different scenarios. We have also taken a close look at the critical interaction between intermittent forms of renewable energy, such as wind and solar, and gas-fired power as a reliable source of backup capacity.

We look at the drivers of natural gas use in the industrial, commercial and residential sectors, and examine the important question of whether natural gas, in one form or another, could be a viable and efficient substitute for gasoline or diesel in the transportation sector. We also examine the possible futures of global natural gas markets, and the geopolitical significance of the ever-expanding role of natural gas in the global economy. Finally, we make recommendations for research and development priorities and for the means by which public support should be provided.

Study Group Participants

Study Co-Chairs:

ERNEST J. MONIZ — CHAIR
Cecil and Ida Green Professor of Physics and Engineering Systems, MIT
Director, MIT Energy Initiative (MITEI)

HENRY D. JACOBY — CO-CHAIR
Professor of Management, MIT

ANTHONY J. M. MEGGS — CO-CHAIR
Visiting Engineer, MITEI

Study Group

ROBERT C. ARMSTRONG
Chevron Professor, Department of Chemical Engineering, MIT
Deputy Director, MITEI

DANIEL R. COHN
Senior Research Scientist, Plasma Science and Fusion Center, MIT
Executive Director, Natural Gas Study

STEPHEN R. CONNORS
Research Scientist, MITEI

JOHN M. DEUTCH
Institute Professor, Department of Chemistry, MIT

QUDSIA J. EJAZ
Postdoctoral Associate, MITEI

JOSEPH S. HEZIR
Visiting Engineer, MITEI

GORDON M. KAUFMAN
Morris A. Adelman Professor of Management (Emeritus), MIT

MELANIE A. KENDERDINE
Executive Director, MITEI

FRANCIS O'SULLIVAN
Research Engineer, MITEI

SERGEY PALTSEV
Principal Research Scientist, Joint Program on the Science and Policy of Global Change, MIT

JOHN E. PARSONS
Senior Lecturer, Sloan School of Management, MIT
Executive Director, Joint Program on the Science and Policy of Global Change and Center for Energy and Environmental Policy Research, MIT

IGNACIO PEREZ-ARRIAGA
Professor of Electrical Engineering, Comillas University, Spain
Visiting Professor, Engineering Systems Division, MIT

JOHN M. REILLY
Senior Lecturer, Sloan School of Management, MIT
Co-Director, Joint Program on the Science and Policy of Global Change, MIT

CAROLYN SETO
Clare Boothe Luce Postdoctoral Fellow, Department of Chemical Engineering, MIT

MORT D. WEBSTER
Assistant Professor, Engineering Systems Division, MIT

YINGXIA YANG
MITEI MIT Study on the Future of Natural Gas iii

Contributing Authors

GREGORY S. MCRAE
Professor of Chemical Engineering (Emeritus), MIT

CAROLYN RUPPEL
Visiting Scientist, Department of Earth, Atmospheric and Planetary Sciences, MIT

Graduate Research Assistants

SARAH FLETCHER

MIKE HAGERTY
Exelon – MIT Energy Fellow

ORGHENERUME KRAGHA

TOMMY LEUNG
Cummins – MIT Energy Fellow

PAUL MURPHY
Total – MIT Energy Fellow

ANIL RACHOKONDA

KAREN TAPIA-AHUMADA
GTI – MIT Energy Fellow

IBRAHIM TOUKAN
Constellation – MIT Energy Fellow

DOGAN UCOK

YUAN YAO

Advisory Committee Members

THOMAS F. (MACK) MCLARTY, III — CHAIRMAN
President & CEO, McLarty Associates

DENISE BODE
CEO, American Wind Energy Association

RALPH CAVANAGH
Senior Attorney and Co-Director of Energy Program, Natural Resource Defense Council

SUNIL DESHMUKH
Founding Member, Sierra Club India Advisory Council

JOSEPH DOMINGUEZ
Exelon Corporation

RON EDELSTEIN
Gas Technology Institute

NEAL ELLIOTT
Associate Director for Research, American Council for an Energy-Efficient Economy

JOHN HESS
Chairman and CEO, Hess Corporation

JAMES T. JENSEN
President, Jensen Associates

SENATOR (ret.) J. BENNETT JOHNSTON
Chairman, Johnston Associates

VELLO A. KUUSKRAA
President, Advance Resources International, Inc.

MIKE MING
President, Research Partnership to Secure Energy to America

THEODORE ROOSEVELT IV
Managing Director & Chairman, Barclays Capital Clean Tech Initiative

OCTAVIO SIMOES
Vice President of Commercial Development, Sempra Energy

GREG STAPLE
CEO, American Clean Skies Foundation

PETER TERTZAKIAN
Chief Energy Economist and Managing Director, ARC Financial

DAVID VICTOR
Director, Laboratory on International Law and Regulation, University of California, San Diego

ARMANDO ZAMORA
Director, ANH-Agencia Nacional De Hidrocarburos