Reduction in methane emissions, CO2 separation, and hydrocarbon destination are some of the challenges that will have to be faced.  

Whereas in Brazil the challenge is developing technologies that allow exploring the 500 billion m³ of our natural gas reserves, without competing with renewable sources of energy, in China, the bottlenecks are the high price and the infrastructure that has to be optimised to push the demand for gas. In the United States, the major issue is the excess of the resource and how to transform it into high value-added products. In England, the challenge is to manage the decline of gas, with the perspective of using the existing infrastructure to transport hydrogen, for example.

These were some of the conclusions from a round table conducted with experts from these four countries during the Sustainable Gas Research & Innovation Conference, in the late September, in São Paulo. The event was promoted by the Research Centre for Gas Innovation – RCGI, from Brazil, and by the Sustainable Gas Institute (SGI), from England. In a GHG reduction scenario and the rise in natural gas supply, they outlined the possibilities and limits for using natural gas in their countries.

An opportunity, several challenges – For Júlio Meneghini, academic director of the Research Centre for Gas Innovation – RCGI, in Brazil, the major issue is working with natural gas together with renewable sources of energy, and stop considering this source of energy a problem which comes embedded in oil exploration.

He remarked that, when the pre-salt started operating, Brazil started to access large volumes of natural gas associated to oil, but a strategy lacked to deal with the resource. “We have to revert the idea that natural gas is ‘a problem’ to the pre-salt, which has been the view of Petrobras in recent years. We have to rise to this challenge as we did 25 years ago with deep offshore exploration, currently a reason of pride to Petrobras, one of the leaders in deep exploration technologies,” highlighted Meneghini.

And the way for this is to bet on innovations. According to him, there are several challenges to overcome and which the RCGI has been working on. An example is the amount of CO2 found in natural gas in some of the pre-salt fields. There are wells in which the natural gas coming out does not contain the conventional 20% CO2, it contains 50%. It is almost like biogas.

“The question, then, is it worth purifying this gas so as to have only methane and so that it can be transported to land by pipelines, or whether it is better to burn it in offshore devices and using the carbon capture and storage technology to generate electric power with zero CO2 emission. How much does each one cost and which is better? These are the questions that we, at the RCGI, together with the SGI and other research institutions, will be trying to solve in the next five years.”

The assistant executive for the Secretary of Energy for the State of São Paulo, Dirceu Abrahão, shares this point of view. “We are expecting the large volumes of gas we have in Brazil, especially in the pre-salt, to stimulate innovation. Because the huge challenge is that this gas lies 7 thousand metres deep. They are expensive plants, about 3 thousand metres deep, which have to separate large volumes of CO2 and H2S. But these are exciting challenges, due to the technology and the innovation they can promote to make the model viable,” he added.

Brazil currently counts on 500 billion cubic metres of proved natural gas reserves. Despite this potential, Brazil is one of the five major importers of liquefied natural gas (LNG) in Latin America. The increase in the Brazilian production via the pre-salt points to a reduction in the dependence of imported LNG in the next years.

Way of no return – In China, two-thirds of the primary energy used still derives from coal. Natural gas is one of the alternatives to help the country meet its GHG reduction goals. “We made a serious promise to cut emissions in Paris: increasing our non-fossil sources of energy by 15% by 2020 and by 30% by 2030. Natural gas has been growing and its role in replacing coal is important to us. Its participation in the matrix is currently below 6%, but we intend to increase it to 10% in five years,” said Professor Zheng Li, from the Thermal Energy Department of Tsinghua University.

There are many opportunities for natural gas in China, according to Li, but also both institutional and infrastructure barriers. “In the transportation sector, we already have over 200 thousand vehicles operating with LNG and the demand shall grow, because we have to control air pollution,” he exemplified. One of the barriers is the price issue. The demand for natural gas had been growing by 16% a year, but between 2014 and 2015, this increase faded (3.7%) due to the high price of natural gas. “The gas price is controlled by the State; a reform in price formation is necessary to increase the economic competitivity of China, to make the internal costs viable, to make the investments in the sector attractive and to increase the use of the resource,” he summed.

He explained that the price of natural gas is higher for the industrial sector than for the domestic one, which hinders its use by the industry. Another crucial issue is infrastructure. “As an example, there is no gas storage in China and the difference in demand between the winter and the summer is very large. Therefore, we also need to reform the oil and gas industry. In sum, China needs natural gas and it will play an important role in the future; in the short-term, however, there are a number of institutional problems. Hence reforms in price formulation and in the oil and gas industry are critical points for the use of natural gas in my country.”

Abundance is the problem – In the United States (USA), the major issue is the abundance of the resource, led by the continuous discovery of gas and shale reserves and its consequences, both economic and strategic. “On the supply side, there is plenty of gas in the USA. Whenever we search, we find more. This without considering that natural gas is endogenous to the exploration model, and the price of oil is exogenous. Whereas the latter goes from US$ 125 to US$ 40, the price of natural gas is around US$ 5 per MMBTU, and never rises, because we keep producing more,” summarises David Daniels, Chief Energy Modeller of the Energy Information Administration (EIA).

On the demand side, according to him, two sectors lead gas consumption in the country: transportation and power generation. “In transportation, the EIA does not contemplate a large-scale transition to natural gas. In the power generation, though, natural gas has been growing in practically all the regions in the world.”

According to Daniels, in the OECD (Organisation for Economic Co-operation and Development) member countries, the use of natural gas grows, as well as the use of renewables, and the energy consumption remains stable. “In the non-OECD countries, the demand for energy has increased, due to the fast economic growth, renewables have grown, natural gas has grown and the use of coal has kept at the same level.”

According to him, however, the price of transporting natural gas by ships is very high. For an idea, transporting oil in the world by ship, costs about US$ 2 per barrel. Transporting natural gas may reach US$ 10 per MMBTU. “We can use pipelines to export to neighbouring countries, such as Mexico, Canada…. But Canada also has a lot of gas and Mexico has reserves it has been trying to develop. That is, North America has plenty of gas.”

One of the consequences of the abundance of the resource is the super supply of other hydrocarbons found together with it, such as ethane. “The growth rate for ethane in the USA has been more significant in the last 10 years, than the growth of natural gas itself,” reveals David Allen, Director of the Center for Energy and Environmental Resources of the University of Texas. According to him, there is plenty of ethane.

“The USA use ethane to manufacture chemicals, and also products such as plastic. But we have already saturated the ethane market in the USA for manufacturing chemicals. We started to export ethane to Europe. But this market will soon be saturated, too; as compared to the natural gas market, the ethane market is small.”

According to Allen, it is necessary to find ways for transforming ethane into high demand products. “The good news is that cracking ethane is much easier than cracking methane. But we have to see to what scale we will do this. During the conference, we heard a lot about deep sea procedures, on the very side of the well. Is that what we are going to do with all this ethane? Or are we going to build more chemical factories throughout the globe, in places such as Houston in Texas? This is the great question. And my prediction tells me we will see radical innovations in the area of the natural gas liquids, as these compounds are called, particularly in the ethane area.”

Another challenge is the methane emissions. “To decrease the GHG emission footprint from the natural gas system, the methane emission has to be reduced. In the USA, a small fraction of the sources, which we are starting to call super emitters, account for the major share of the emissions. The challenge is finding them, which is extremely difficult. What we are studying now is how to effectively find the super methane emitters quickly and at the lowest cost possible. For this, major innovations are also expected in this area in the next five years, which will greatly reduce the GHG footprint of natural gas.”

Managing the decline – In the United Kingdom, as opposed to China, there is small room for natural gas to grow, according to Jim Watson, research director of the UK Energy Research Centre. “We have been moving from coal to natural gas since the 1970s, in services, in the industry, in residences…. There is little else to do, maybe in the transportation area, but the role of gas has been declining for about ten years.”

According to him, the major challenge in his country is to manage the decline. “One of the challenges is to keep the structure that conveys gas to homes and industries alive and open, as we use less and less. The reason is that the networks may be used again, for example, to distribute hydrogen. This is an important issue for decision-makers, managers, regulators, industries….”

Although the use of natural gas has been receding, Watson observed that, in the energy sector, gas clearly plays the role of keeping a balance among the renewables to keep the supply safety. “But there are several ways of combining these technologies. More interconnections or greater capacity for gas storage, for example… The question of integration and growth in the use of renewables undergoes a variety of technologies and different strategies, besides the use of conventional plants.” Another opportunity, according to him, is to adopt gas in a low-carbon heating system in countries where, following the example of the United Kingdom, a large amount of heating is necessary during the winter.

Watson also stated that, despite the pressing need for innovations via research and development initiatives, several of the technologies that will be used to meet the climate goals already exist. “It is not only a question of finding new breakthroughs but, in many cases, of reducing costs and of demonstrating the viability of technologies we already have. Because history shows us that the development of new technologies and their insertion in the market take a long time. Therefore, I think many of the answers lie there.”