Natural gas: The revolution is coming

Natural gas today accounts for approximately 22% of world energy demand. Th is figure is skewed because of the 26% gas market share in the U.S., the bi ggest consumer. In Europe, outside of the former Soviet Union, with a popul ation of 1.5 times that of the U.S., gas accounts for 19% of the market. In terms of per-capita energy consumption, the average U.S. citizen consumes approximately 2.2 times more gas than a European. These ratios for both tot al usage and gas market share in the energy mix became much more lopsided f or almost all countries. A move toward increasing gas use is now under way, from both demand and supply standpoints. For example, Brazil (the world's 10th largest economy with a current gas marker share of 5%) has embarked on a very ambitious plan to increase gas use. Several gas-producing countries also announced ambitious plans for markedly increasing gas output: Qatar. Qman, Venezuela, and Saudi Arabia. Liquefied natural-gas (LNG) facilities a re currently being built, and serious LNG tanker shortages are forecast for the nest 3 to 4 years. The U.S. has made an emphatic move toward increased gas use. Already less t han 5% of electric-power generation uses oil; natural gas will fuel well ov er 90% of new power generation built in the U.S. over the next decade. Gas- fired turbine manufacturing has a 3-year backlog. Once manufacturing catche s up with demand, the transition to natural gas will cause substantial shor tages for a considerable time. This will cover new peaks associated with su mmer electricity demands, not just the traditional peaks in winter heating. More crucial, we believe that environmental concerns, real or imagined, wi ll push the emergence of fuel cells much faster than currently envisioned. Natural gas will be in the center of this transformation, resulting in a gr eatly expanded market share of gas in the world energy mis, increasing to 4 0 to 50% by 2020. We present a comprehensive analysis of the current state of natural-gas sup ply and demand. We provide the conventional forecasts and rationalize our f orecasts, which are heavily influenced by electric deregulation, LNG conver sion, and fuel cells.