Future of the Natural Gas Industry

It is well recognized that the nineteenth century was a century of coal that
supported the initiation of industrial revolution in Europe. The twentieth
century was the century of oil that was the primary energy source to support the growth of global economy. Figure 1-2 shows world energy consumption in the past three decades and forecast for the next two decades
(DOE/EIA 2001). It indicates that the demand of the world's economy for
energy is ever increasing. Simmons (2000) concluded that energy disruptions should be a "genuine concern." Simmons suggests that it will likely
cause chronic energy shortage as early as 2010. It will eventually evolve
into a serious energy crunch.
The way to avoid such a crunch is to expand energy supply and move from
oil to natural gas and, eventually, to hydrogen. Natural gas is the fuel that is
superior to other energy sources not only in economic attractiveness but
also in environmental concerns. At the end of the last century, natural gas
took over the position of coal as the number two energy source behind oil.
In 2000, total world energy consumption was slightly below 400 quadrillion

(1015) Btu. Of this, oil accounted for 39 percent, while natural gas and coal
provided 23 percent and 22 percent, respectively (DOE/EIA 2001). It is a
historical imperative that the transition from oil to natural must be made in
the early twenty-first century. This is not only motivated by environmental
considerations but also by technological innovations and refinements
(Economides, Demarchos, Saputelli 2002).
The United States has the world's largest economy and is by far the most
voracious user of energy. Figure 1-3 presents U.S. natural gas production
in the last three decades. The U.S. demand for natural gas can also be seen
from the increase in gas price in the last three decades (Figure 1-4). The
very conservative estimates (DOE/EIA 2001) suggest that while the total
annual energy demand between 2000 and 2020 will increase by 30 percent from 98 to 127 quadrillion Btu, natural gas will increase by over 60
percent from 22.5 to 35.6 quadrillion Btu, or about 35 Tcf. This means
that the natural gas share of the energy mix will increase from 23 percent
to over 28 percent. It is clear that natural gas is now becoming the premier
fuel of choice for the world economy. Other so-called alternative energy
sources have little chance to compete with natural gas.