Southern African Natural Gas Advisory Service Service

Acceptability  This matter relates to how acceptable particular energies are in terms of safety, convenience, reliability, price and other considerations to end users. It also relates to the acceptability of a fuel in terms of environmental impacts and other considerations such as security of supply, preservation of the physical (versus global warming) landscape and natural habitat.

From a natural gas user perspective, countless independent surveys carried out in established natural gas markets have shown that residential, commercial and industrial customers prefer the convenience, safety, reliability, quality of end-use energy services provided and the price competitiveness of natural gas over any of the alternatives. Natural gas is without doubt the most favoured thermal energy source, where it is available, and this has been shown throughout Western and Eastern Europe, Australia, Japan, US, and the Far East. So from a customer’s viewpoint natural gas can claim to probably be the most acceptable of all energies to energy users.

It is also the most popular fuel for the generation of electricity by utilities because it is safe, competitively priced and needs less capital plant investment than any of the alternatives. Natural gas also creates appreciably less C02 and other pollutant emissions than either coal or oil; and, it is very safe in relation to the huge risks involved with nuclear plants.  It is for these reasons that there has been a ‘flight’ away from coal, oil and nuclear electricity generation plant investment to natural gas, when power producers are free to do so. In the U.S. Europe, China and India there are major investments taking place in the latest generation of super efficient natural gas electricity production facilities to meet the rising demand for electricity.  

There are countless illustrations of how natural gas is highly acceptable to users. Three examples are described below:

    Natural gas vehicles are becoming highly acceptable to public transport operators in many cities around the world. The lower emissions, operating costs and cleaner environment that result from this particular application of CNG are increasingly visible in established gas markets.

 With natural gas being the cleanest of the thermal fossil fuels, it is highly acceptable in many process industries where pure and controllable heat is required. These include glass and ceramic manufacture and bulk food processing.

 With the controllability of natural gas for cooking, professional chef’s insist on using it in their restaurant and hotel kitchens.       

Essential energy features

There are three helpful evaluative criteria that can be applied to assess the comparative advantages of different types of energy. They are as follows: Affordability, Accessibility and Acceptability. We will now apply each  of these criteria to  Natural Gas:

Affordability This relates to how affordable a particular energy is when compared on a life cycle or supply chain basis with rival energies such as coal, oil, electricity, renewable energies of wind, wave and solar; and, nuclear.

The cost of natural gas to end users is lower than all other alternative comparable fuels in mature competitive gas markets around the world in places like Europe and the USA. The competitiveness of natural gas prices are set to be sustained as more natural gas is discovered and as the supply industry continues its relentless drive for greater efficiencies, cutting costs at every step in the complex supply chain. As firm evidence of these downward pressures on natural gas prices two examples are described below:

-   In terms of cost reductions of natural gas supply technology it can be noted that the average investment cost for a liquefaction plant to produce LNG

    dropped from US $ 250/t/yr in the 1990’s to US $ 200/t/yr as we entered the 21st century. These cost reductions in terms of cost per ton of LNG are set

     to continue to decline.

-   In end-user markets for natural gas a ‘ netback ‘ market value approach is generally used whereby gas prices are set in relation to and lower than competing      fuels. This has been the customary basis of gas pricing throughout the gas supply chain in major consuming countries and has played a decisive role in securing     large numbers of satisfied natural gas users. There are many cases in mature natural gas markets around the world where natural gas prices to consumers     are as much as a half or a third of the comparable electricity price. Natural gas is now also lower in price when all the necessary externals are included such as     storage, handling and waste disposal of oil and coal residues.

In the U.S. for example in 2011 the U.S. Department of Energy has estimated that natural gas is the lowest cost source of energy for residential use, where it is available. They also estimate that on average the cost of natural gas per British thermal unit is more than 60% less than the cost of electricity.   

Accessibility This matter relates to how readily available and how reliable the supply of a particular energy is and how easily consumers can obtain it. Since all energies require a system of supply with electricity national supply grids, oil needing pipelines and tanker vehicles; and, coal being transported in coal trains, so too natural gas requires a supply infrastructure.

However with the advent of LNG and CNG and other supply innovations, natural gas can now be supplied to consumers in a variety of cost effective ways. Ultimately, natural gas to realize its full potential as a readily accessible fuel requires a pipeline supply network and these can be constructed quickly, cost effectively and with minimum environmental impact.

In established gas markets natural gas is readily accessible via a local reticulation supply network. Natural gas supply in these circumstances has a more reliable and consistent supply record than any other energy source including electricity. Since electricity has to be distributed via above ground electricity supply networks they are subject to interruptions caused by troublesome weather conditions. Oil and coal deliveries by rail and road can suffer disruption to supplies. In contrast once gas supply pipes have been constructed they operate invisibly, silently and efficiently underground whatever disruptive events may be taking place on the surface.                

Accessibility also relates to longer term availability of natural gas and global reserves and production. On this front as well, natural gas provides a reassuring future. Since 1980, proven world reserves of natural gas have been growing at an annual average of almost 4% (compared with less than 2.5% for oil) as a result of a succession of exciting gas exploration discoveries, new production technologies and improved assessment of existing natural gas fields.

The volume of world natural gas reserves has more than doubled since the 1980’s and it appears highly likely that these trends will continue into the future.

Since 2011 alone, massive new natural gas fields have also been discovered in East Africa particularly in Mozambique, Tanzania and Kenya. In recent months enormous gas fields have been discovered off the Tanzanian coast by British Gas and Norway’s Statoil. The Statoil offshore gas field alone is estimated to have around a billion barrels of oil equivalent (boe). Then further south off the coast of northern Mozambique Italy’s Eni recently announced a gas discovery of 1.3 billion boe; and, an American exploration company Anadarko, have made a similar discovery in another offshore area. With plans being progressed for the construction of a major LNG export terminal in Mozambique it is set to become a major exporter within just a few years.  

As a result of just these discoveries, South Africa and many Southern African countries now have ready access to large volumes of natural gas .

It also relates to the cost and price consumers pay at the point of consumption. Natural gas is already highly affordable and is set to become more so with new discoveries, more diverse global sources of supply and competition, the rapidly increasing international LNG supply capacity and technical improvements at every stage in the supply chain. The relative cost of natural gas to other energy sources has been consistently dropping and looks set to continue to do so. Just consider the following:

-     Many renewable energy sources, although they will ultimately have to provide for man’s energy needs, this will not be on any significant affordable scale

        to fossil fuels for  many decades. In the meanwhile although seductive, most renewable energy sources need to receive massive subsidies to come even

        close to competing with fossil fuels and carbon based sources of electricity generation. The hike in electricity costs in South Africa are partly to provide for such subsidies for wind farms, solar energy and other renewable energy projects. It is the consumer who must meet these additional costs.   

-     The cost of oil continues to be a worry for the global economy and the use of this particular fossil based fuel has major environmental costs.

-    Coal is also an increasingly costly fossil fuel in terms to produce but also to transport, deploy in end use energy applications and with high environmental  impacts.

-     Nuclear, particularly in the light of the recent global nuclear tragedy in Japan, already a high cost alternative to construct such sources of electrical energy, is set to become yet more expensive and problematical, especially from an absolute safety perspective.

With the cost of LNG plant becoming more competitive, natural gas can readily be imported to a country and then transported in bulk to centres of consumption. Pipeline networks can be built quickly laying down a permanent and safe supply infrastructure.