Trends in the Natural Gas Market
The world’s energy market continues to undergo a fundamental shift toward renewable and alternative energy sources, even amidst the current pandemic. Renewables such as wind, solar, and fossil fuels like natural gas will help meet the increasing global demand for energy as the economy expands. Here, we’ll take a closer look at aspects that greatly affect the state of the natural gas market in 2020 and beyond.
Natural gas leads the way. As the energy industry shifts toward renewable energy sources, natural gas plays a key role in meeting alternative energy and environmental goals. According to the US Energy Information Administration, natural gas consumption in the US industrial sector will increase by 4.6%. BP named liquified natural gas as the fastest-growing fossil fuel and is projected to increase in demand by 34%.
Decarbonization. Natural gas emits 50-60% less carbon dioxide when combusted, making it an efficient energy source with less environmental impact. Gas Processing News states that by 2035, coal will account for less than 25% of primary energy, its lowest share since the industrial revolution. Coal power plants continue to be decommissioned in favor of cleaner, more efficient natural gas power plants.
Emissions from carbon and methane continue to decline. According to an article by the American Gas Association (AGA), “Natural gas has led the U.S. in reductions of greenhouse gas emissions associated with energy use.” Methane emissions from natural gas distribution systems have declined over time. Current EPA estimates of natural gas system methane show an emissions rate of production at 1.0%, which is well below the threshold designed for immediate benefits to the climate.
Supply outpaces demand. The COVID-19 pandemic, while a humanitarian crisis at its core, continues to deeply impact the global economy. With a heavy supply of dry shale natural gas from the Appalachian Basin and the Permian Basin, supply is high amidst declining demand given the reduced levels of activity. In fact, according to a report by McKinsey, the overall demand for refined products is down at least 20 percent. Amidst widespread bankruptcies in the oil and gas industry, the pandemic may present an opportunity to accelerate the shift toward renewables, exemplified by the recent Northern Lights CCS project in Norway, which aims to achieve carbon neutrality across Europe by 2050.
While Europe continues to lead the world toward renewables, significant gains in climate change will only be achieved from global policy and pricing from the world’s largest emitters. The AGA states that “A meaningful global price for carbon is likely to be the most efficient mechanism through which to achieve an even faster transition to a low-carbon world.”
While the energy sector continues to shift to renewables to reduce reliance on oil, natural gas will continue to play a major role in power generation. YZ Systems’ NJEX odorant injection products measure and inject precise amounts of liquids and odorant into natural pipelines to ensure detectability.