Gas Usage

Natural gas offers a number of significant environmental benefits over other fossil fuels. Largely a result of its chemical simplicity, it is the cleanest burning of all fossil fuels. Natural gas is primarily composed of methane, with most of the impurities removed by gas processing at the field and gas plant.

When combusted, the main products of combustion are CO2, water vapor and small amounts of NOx and SOx. Coal and oil, by contrast, are composed of much more complex molecules, with a higher carbon ratio and higher nitrogen and sulfur contents. This means that when combusted, coal and oil release higher levels of harmful emissions, including nitrogen oxides (NOx), SOx, CO2, carbon monoxide (CO), and other hydrocarbons. In addition, coal and fuel oil release ash particles - particles that do not burn - into the environment.

Electricity Generation

Electricity generation is the main nonresidential use of natural gas. Globally, there is an increasing demand for electricity, coupled with reduced tolerances for nuclear and hydro plants, tightening limits on air, water, and noise pollution emissions, as well as high cost for wind and solar energy. This leaves gas-fired generation as one of the only remaining options for electrical utility companies. Because the cost of fuel accounts for around 65% of the cost of electricity, the choice of fuel is an important decision for power plant developers.

Coal remains the dominant fuel for the world’s thermal electric power plants. Coal has been the main thermal electric fuel due to its cheap price, worldwide availability, easy transport, and low-technology threshold. However, as stated above, Coal’s biggest drawback is the pollution emitted from its combustion. Modern gas-fired power plants are much cleaner and more efficient than their predecessors. They are also larger, cheaper to build, less noisy, less polluting, and easier to switch on and off. In addition, obtaining permits to build gas-fired plants is usually much easier than an equivalent coal or nuclear plant for these reasons.

As shown above, daily swing can be broken into three distinct phases: base load, intermediate or cycling load, and peak load. Base load power is the level of minimum power demand, representing about 50% of total generation capacity required. Typically, base load power stations are large nuclear, hydroelectric, or coal-burning plants that are expensive to build, with high fixed costs. However, they are cheap to maintain and operate. They operate continuously and are difficult to switch on or off. Intermediate or cycling load plants are used for a number of hours a day and have moderate fixed and operating costs, such as some fuel oil and gas plants. Peak load plants cover demand during the periods of highest consumption. These plants must be able to come online quickly, and because they are not used all the time, they have relatively low fixed costs but can afford high operating costs. Typically, peak load plants are gas-fired or diesel-powered generators.

The development of IPPs and the increased efficiency of gas-fired combined cycle plants have allowed gas to become the fuel of choice in both intermediate and peak load phases. In many parts of the world where gas is relatively cheap, such as the Middle East, gas plants have also become the choice for base load power plants. Gas is also preferred where permitting additional nuclear or coal plants is difficult. This trend will undoubtedly accelerate in the future.

In conventional steam power plants, fuels such as gas, coal, or oil generate steam, which then powers a turbine to generate electricity. This process generates waste heat from the steam generator as well as low-pressure steam from the turbine. The low-pressure steam can be used for district heating, if demand exists, but cannot be used to generate additional power. The total efficiency, or ratio of energy input versus electricity energy produced, for conventional power plants is around 34%.

A combined cycle plant, by contrast, generates power directly from a gas generator when gas is burned directly in a turbine to generate electricity. It also generates power from steam generated from heat exhausted by the gas generator. Because the gas generator runs at high temperatures, steam generated from the gas turbine’s excess waste heat has sufficient energy to drive a steam turbine. Combined cycle plant efficiencies have increased from 40% to 50% in the 1980s to around 55% in the most advanced plants.

The cost of power generation varies by fuel type. The table below show the price of gas-fired combined cycle generated power versus power generated by other fuels. As shown, on a full cost (including fuel as well as capital depreciation costs) basis, gas is more expensive than existing nuclear power generation, but significantly cheaper than coal or renewable power. If environmental costs are added to this analysis, the advantages of gas will be greater. However, it should be noted that gas fuel costs have risen significantly over the past two years thus reducing some of the price advantages.

Petrochemicals, Steel, and Fertilizer

Methanol, produced from natural gas, is an important chemical used to produce fuel additives, formaldehyde, acetic acid, plastics, vinyl, textiles, and other products. Methanol can also be converted into both ethylene and propylene through a process known as methanol-to-olefins conversion. Ethylene and propylene can also be produced directly from ethane, butane, and propane separated from other natural gas compounds or from naphtha produced from crude oil. Ethylene and propylene are relatively stable compounds that can be transported by pipeline or special ships to petrochemical plants to be converted to a variety of materials such as polyethylene, PVC plastics, resins, antifreeze, paints, automotive components, packaging materials, textile fibers, and countless other specialty plastics and foams.

More than 97% of the world’s synthetic fertilizer is produced from synthetically produced ammonia derived from natural gas. The process requires relatively high temperatures and pressures, and thus requires cheap energy to be economic. Natural gas, with its relatively cheap price, provides both the energy and the feedstock for the process.

The steel industry is the single largest industrial energy consumer, absorbing about 4% of world’s energy production. In developed countries, the cost of energy is between 15% and 20% of the overall cost of steel production. The modern Direct Reduced Iron method for producing steel directly removes oxygen by reacting the ore with a hydrogen-rich and CO-rich gas produced by catalyzing methane derived from natural gas. As in fertilizer production, natural gas provides both the energy and the feedstock for the process

Remote, smaller gas fields not economic for LNG or pipeline development may be ideal candidates for commercializing via petrochemical, fertilizer, or steel developments. Production of aluminum requires large amounts of electric power, which may be generated using natural gas. Energy costs account for an estimated 30% to 45% of total aluminum production costs. Such investments can be economic at both large and small scales, may be relatively quick to build, and can often be project or debt financed.

The table below summarizes approximate gas requirements for various commercialization options.

Transport Fuel

Though the benefits of natural gas as a transport fuel are well-known, growth in direct natural gas usage in the transportation sector has been slow to materialize. Studies indicate that vehicles operating on natural gas versus conventional fuels such as gasoline and diesel fuels can reduce CO output by 90% to 97% and CO2 by 25%. The switch can also significantly reduce NOx emissions, as well as nonhydrocarbon emissions and particulates. Fuel supply infrastructure around the world heavily favors reliance on traditional liquid fuels, making conversion to natural gas difficult. 

Natural gas in the form of compressed natural gas (CNG), which is basically methane gas pressured to 200 bar to 250 bar, is an ideal transportation fuel. LPGs are also commonly used transport fuels.

Natural gas holds the greatest promise as a fuel for fleet vehicles that refuel at a central location, such as transit buses, short-haul delivery vehicles, taxis, government cars, and light trucks. There are currently approximately 65,000 natural gas vehicles (NGVs) in operation in the United States using CNG and LNG as their main fuels. There are an estimated 10 – 20 million vehicles around the world that use CNG and LPG as their primary fuel. Notable countries are (Argentina, Pakistan, Brazil, Italy, India, Iran, US (for CNG) and Italy, Australia and Japan (for LPG vehicles).

Residential Gas Markets

Gas has been consumed in the residential market since the 1800s, when gas produced from coal, known as coal gas, was piped to city streets for lighting. Today, most large cities in North America, Europe, and Northern Asia have extensive natural gas networks supplying residential and commercial consumers with clean and reliable natural gas, primarily for space heating, water heating, and cooking. Many cities in developing countries are also installing local gas pipelines and networks.

In developed countries, gas is typical delivered to the residential customer via the marketing structure shown below.