James Trainham, James Bartis, David Dayton, Michael Roberts, and Daniel Weiss
I’m now going to address another subject—shale gas. This isn’t strictly one of the renewable energies, but I think it’s such an important part of our quest for energy security that we should not omit it from the discussion. It’s likely to play a role as we transition to alternatives. How might we factor shale gas into our energy future? Shale gas is going to become quite prevalent, and we have huge reserves. The latest
as-sessments show that reserves of natural gas went up by about 39 percent, and it will go up that much again by the time of our next assessment in the summer of 2012.
Natural gas can provide us with an interim solu-tion before we can develop some more of the true alternatives and build the infrastructure we need to make those a reality. I think we all agree that we have alternatives to oil when it comes to electrical power, among them shale gases. Can we replace oil with the natural gas and gas-to-liquids technology? We’ve done this in the petroleum industry and the chemical industry for a long time. It’s not an unknown technol-ogy, nor something which calls for a great invention.
With more experience, we could bring the cost down.
So I’d like some comments on a potential move to use shale gas as a source for gas-to-liquids transportation fuels.
David Dayton: One of the challenges of that is, again, the existing infrastructure. That’s because 80 percent of the world’s methanol today is made from natural gas.13 The current figure might be a little high-er than that. As we heard earlihigh-er today, methanol is not a functional fuel at this moment, but we can con-vert our cars to burn it as a fuel. Top Fuel dragsters and Formula One racers use methanol for fuel all the time. It could be a fine fuel for our autos. So I think one of the challenges with gas-to-liquids is trying to make something that’s hydrocarbon compatible.
You can use methanol-to-gasoline (MTG) technol-ogy.14 It’s almost but not quite gasoline. It’s highly aromatic, so it’s a blend stock. It’s not going to replace all of your petroleum. Although the Fischer-Tropsch plant in Qatar is having technical troubles right now, the process is technically feasible.15 It’s just not terribly cost-effective. Another option for shale gas is to use it
in compressed natural gas (CNG) vehicles.16 You don’t have to do anything to it except compress it and put it on a vehicle. All the buses in Chapel Hill run on CNG right now or as hybrids.
James Bartis: My information is that Qatar Petro-leum’s plants are not in trouble technically at this time.
Right now, the world makes about 300,000 barrels a day of petroleum substitutes using a process called the Fischer-Tropsch process, which was invented in Germany in the 1920s. The plants the Germans built were frequently bombing targets of the United States and the Allies during World War II. When South Africa went apartheid in 1954, it was worried about being embargoed, so it built a Fischer-Tropsch plant that used coal. More recently, a second generation has come about. Mobil built a plant in New Zealand that converts natural gas to high quality gasoline.
They shut the New Zealand plant in the 1990s be-cause the process, being energy-intensive, was not competitive with the low oil prices that were preva-lent during that period. More recently, Shell built a plant in Malaysia that’s making 17,000 barrels a day.
A couple of years ago, a brand new plant started in Qatar making 35,000 barrels a day. Shell is starting up another plant in Qatar that is designed to make 140,000 barrels. So by the end of this year, we’re go-ing to have almost 200,000 barrels a day of production from this method based on natural gas. The method works only if the natural gas input is fairly low cost, and the one place where there’s going to be low-cost gas in the United States is Alaska.
Audience: Prudhoe Bay?
James Bartis: With all the shale gas coming in, I think the likelihood is small that we’ll build a pipe-line from Alaska through Canada to the United States
to bring Alaskan gas to a low-cost gas market. There is a divergence between what natural gas costs and what oil costs. Wholesale gas today is going for the equivalent of $24-a-barrel oil.17 If you can take that gas and make it into an oil product, you can sell it at
$80 or $90 a barrel today. That’s the motivation. You are most likely to see that happen in Alaska. Whether that makes sense elsewhere in the United States really depends on whether there are other opportunities to use that natural gas. We’ve lost a lot of our chemical industry to Saudi Arabia because of the high price of gas here. These industries might revive due to the availability of gas from shale formations in the United States.
Daniel Weiss: Fuel produced from coal has a much higher carbon dioxide content than regular gasoline.
Is that true for fuel produced from natural gas as well?
James Bartis: Actually, the coal-based fuel has a lower carbon dioxide content than regular gasoline.
Daniel Weiss: Are we talking about gas or coal?
James Bartis: Either one. But what really counts is life cycle emissions. If you start with coal and exam-ine life cycle emissions, you double greenhouse gas emissions compared to conventional oil. So if you’re worrying about global warming, that’s an unaccept-able approach. There are ways to use liquid fuels from natural gas without carbon sequestration in such a way as to break even with conventional petroleum.
By that, I mean that you will end up with a fuel that has 5 percent higher or 5 percent lower carbon diox-ide content. That won’t change the world. There’s a lot of hydrogen in natural gas. There’s not in coal. That’s why you end up with very high emissions when you use coal. So this is not a greenhouse gas prob-lem. It doesn’t fix the problem, but it doesn’t make it any worse.
David Dayton: Shale gas won’t be cheap. There aren’t many refineries being built in this country, so even from a peak oil perspective, we may be refinery limited, not production limited. But the point is that if you put a natural gas-to-liquids plant in, you’re going to have to invest upwards of $3 to $4 billion, depend-ing on the size of the plant, to make it economically competitive.
Daniel Weiss: The Center for American Progress has been a long-time advocate of increased use of nat-ural gas as a bridge fuel to a clean energy future that’s probably 20 or 30 or more years away. A recent New York Times report found that the production of shale gas has a lot of potential and actual environmental impacts. The series did not even address the fugitive methane that escapes when doing the hydraulic frac-turing that produces the shale gas. Those issues are going to have to be addressed concurrently because otherwise we will address one problem while creat-ing another. So far, the natural gas producers have resisted any sort of federal oversight and standards for groundwater and surface water protection, air pol-lution, and methane capture.
James Bartis: Shale gas has happened so quickly that the states and federal government have been un-able to move in terms of regulating it.
Daniel Weiss: Right now, thanks to the 2005 en-ergy law, the federal government is prohibited from regulating shale gas’s impact on drinking water, but it still has authority over clean air and clean water.
James Bartis: To mitigate these problems, the price is going to have to go up. But I don’t see that stopping shale development. It just means that instead of com-ing in at $3.50, the cost might be $4 or $4.50. That’s the price we pay to live in a place where we can drink our water, unlike China, for example.
ALTERNATIVE ENERGY AND