Sunday, May 26, 2013

Infrastructure development: Key to increased natural gas adoption

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Many people think that natural gas is better than traditional sources of energy, such as coal and nuclear energy, due to its cleaner burning properties and its sheer abundance in many countries, such as the US and Russia. However, even though natural gas is being used in residential and commercial heating and in many industrial processes, and even as fuel for transportation, it is still not reaching its full potential due to its low market share.

Why is an energy resource that is easily available at vast amounts not being taken advantage of? The answer is simple: because of the abundant supply and low demand, natural gas has become too cheap, which dampened energy companies’ enthusiasm to spend huge amounts of money to build infrastructure that would enable increased production, which in turn, could lead to an increase in consumer adoption. In fact, natural gas is so cheap that drilling it is no longer profitable.

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But some believe that the persistently low prices of natural gas is a result of mild winter (in the US) that resulted in an oversupply of stored gas, slow economy, and continuing expansion of supply, and that a change in development strategy and an increase in heating demand should result in supply balancing, which is the proper amount of supply to offset demand.

When natural gas supply returns to normal, its price can rise and production can be made profitable again. This can lead to an increased rate infrastructure development and an increased consumption of natural gas in the US, which can grow from 23.8 Tcf in 2010 to 31.5 Tcf in 2035.

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