Gas’s Golden Age: The World Energy Outlook

The future is here and the future is natural gas.

In the 2011 edition of its annual World Energy Outlook Report, the International Energy Agency (IEA) forecasts energy usage trends through 2035. The IEA predicts that the world is entering what they call a “Golden Age of Gas.”

IEA’s Golden Age of Gas (GAS) scenario relies on a handful of major trends in global energy markets. These include the massive growth of energy demand in China, that country’s implementation of an ambitious gas usage policy under the 12th Five Year Economic Plan, reduced growth in nuclear power, widespread adoption of unconventional gas extraction, the relative decline in the use of oil and coal, and the possible implementation of a price for carbon emissions.

By 2035, the IEA projects that global natural gas consumption will reach 5.1 trillion cubic meters, nearly 60 percent more than the current level. Its share in the global energy mix will increase from 21 percent to 25 percent. Natural gas will displace the use of coal and exceed it in overall consumption by 2030. Power generation will be the primary application for natural gas, but there will also be increased demand for gas in the transport, industrial, and building sectors.

Eighty percent of the growth in gas use will take place outside of Organization for Economic Co-operation and Development (OECD) countries, and global natural gas reserves can easily meet these demands. Unconventionally sourced gas, largely from shale formations in the United States and China, will come to meet over 40 percent of this increase in demand. The U.S. can generate sufficient supply to meet most of its domestic gas demand and is thus projected to be a minor participant in the natural gas import/export market.

The environmental implications of greater natural gas consumption are unclear. Scientists recommend we allow for no more than a two-degree Celsius increase in the average global temperature to avert the worst consequences forecasted in global warming models. Though natural gas is the cleanest burning fossil fuel, supplanting conventional fossil fuels with natural gas will not provide sufficient carbon emissions savings to avoid potentially dangerous warming levels. Under the Golden Age of Gas scenario, greenhouse gas levels will stabilize at approximately 650 ppm, leading to an increase in average temperature of more than 3.5 degrees Celsius.

The Golden Age of Gas scenario entails additional caveats. In order to meet its projections, the IEA estimates the need for $8 trillion in additional global investments for natural gas extraction and delivery infrastructure. Further, the IEA offers no cost estimate for the extensive damage done to roads by the trucking and heavy machinery surrounding natural gas wells. If the life cycle of conventional and unconventional natural gas production were properly accounted for, it is probable that natural gas would be less cost-competitive in future projections.

The IEA does not attempt to address whether the Golden Age of Gas scenario is optimal; it only identifies it as the one most likely to occur given current trends. If avoiding the worst consequences of global warming becomes imperative, then redirecting some portion of the $8 trillion investment from natural gas development into low-carbon renewables would be necessary.

Graph Source: International Energy Agency. “Are We Entering the Golden Age of Gas?” Page 19. 2011.