Vaclav Smil is a prolific writer of books that explain how the world uses energy. Past titles include Making the Modern World – Materials and Dematerialization, Energy Transitions, Energy Myths and Realities, Energy: A Beginner’s Guide and Energy and Civilization: A History. If you want to understand the physics, chemistry and economics of energy, you need go no further. Natural Gas: Fuel for the 21st Century is four years old, but still provides a solid grounding in its importance for many decades to come.
What we call natural gas is mostly methane (CH4), and it’s been produced by the decomposition of organic matter on earth for at least 3 billion years. Rising concentrations of atmospheric methane can be traced back to the expansion of rice cultivation in Asia, thousands of years ago, and didn’t just begin with the industrial revolution. Ethane and propane are often present in the natural gas mix, although methane dominates. Methane is burned in power plants to produce electricity, and is used for heating and cooking in most homes. Ethane tends to be most valuable as a petrochemical feedstock into plastics, while propane is used to generate heat in various industrial processes, in backyard barbecues and in some cases for transportation.
The Shale Revolution in America has been as much about natural gas as crude oil, although it’s the latter that draws more attention. Natural gas relies heavily on pipelines for transportation, so long term purchase agreements are common in order to justify the significant capital investment in necessary infrastructure. One of the most remarkable energy stories in the last decade is how the U.S. switched from planning greater natural gas imports to becoming a major exporter, as domestic production swelled. Greg Zuckerman’s The Frackers recounts how Cheniere Energy turned reoriented Liquified Natural Gas (LNG) terminals from import to export.
Facts and figures are the very essence of Smil’s books, providing support for every statement. Methane has relatively low energy density, which is why it has to be converted to near liquid form before loading onto LNG tankers; otherwise, the economics of shipment would be unattractive. This is also why it’s not used in road vehicles, where propane’s higher energy density makes it preferable although gasoline dominates because it has even higher energy density.
Natural gas storage is often underground, in depleted natural gas reservoirs, porous rock formations or salt caverns. A giant aboveground tank 100 meters in diameter and 100 meters tall would only hold enough natural gas to heat around 500 Canadian homes during a typical winter. Methane’s high combustion efficiency has led modern residential natural gas-fired furnaces to reach efficiencies of 95-97%. No other fuel is this efficient. In power plants it generates less than 60% as much CO2 as coal. Developing technology may bring further, dramatic improvements (see Clean Fossil Fuels May Be Coming). America’s switch from coal to natural gas for electricity generation is why greenhouse gas emissions have fallen. It’s also why getting China and India, the world’s big coal users in the coming decades, to rely more on natural gas is one of the most important ways the world can combat global warming.
Today’s Energy Transition anticipates the global economy’s move from fossil fuels to zero-carbon based energy. The role of natural gas in this transition is hotly debated – as the cleanest burning fossil fuel, Smil believes (as do we) that it’s going to be part of the solution to lowering emissions. The religious zeal of climate extremists makes no distinction between coal and natural gas, or the impracticality of eliminating 80% of the world’s energy sources. Because this is so unappealing to most people, global emissions grow and Greta lectures ineffectively to virtue-seeking audiences (listen to Davos Talks Climate Change).
Smil provides many more useful insights about natural gas, which will be discussed in a later blog. For a highly informative read, pick up a copy of Natural Gas: Fuel for the 21st Century.
The information provided is for informational purposes only and investors should determine for themselves whether a particular service, security or product is suitable for their investment needs. The information contained herein is not complete, may not be current, is subject to change, and is subject to, and qualified in its entirety by, the more complete disclosures, risk factors and other terms that are contained in the disclosure, prospectus, and offering. Certain information herein has been obtained from third party sources and, although believed to be reliable, has not been independently verified and its accuracy or completeness cannot be guaranteed. No representation is made with respect to the accuracy, completeness or timeliness of this information. Nothing provided on this site constitutes tax advice. Individuals should seek the advice of their own tax advisor for specific information regarding tax consequences of investments. Investments in securities entail risk and are not suitable for all investors. This site is not a recommendation nor an offer to sell (or solicitation of an offer to buy) securities in the United States or in any other jurisdiction.
References to indexes and benchmarks are hypothetical illustrations of aggregate returns and do not reflect the performance of any actual investment. Investors cannot invest in an index and do not reflect the deduction of the advisor’s fees or other trading expenses. There can be no assurance that current investments will be profitable. Actual realized returns will depend on, among other factors, the value of assets and market conditions at the time of disposition, any related transaction costs, and the timing of the purchase. Indexes and benchmarks may not directly correlate or only partially relate to portfolios managed by SL Advisors as they have different underlying investments and may use different strategies or have different objectives than portfolios managed by SL Advisors (e.g. The Alerian index is a group MLP securities in the oil and gas industries. Portfolios may not include the same investments that are included in the Alerian Index. The S & P Index does not directly relate to investment strategies managed by SL Advisers.)
This site may contain forward-looking statements relating to the objectives, opportunities, and the future performance of the U.S. market generally. Forward-looking statements may be identified by the use of such words as; “believe,” “expect,” “anticipate,” “should,” “planned,” “estimated,” “potential” and other similar terms. Examples of forward-looking statements include, but are not limited to, estimates with respect to financial condition, results of operations, and success or lack of success of any particular investment strategy. All are subject to various factors, including, but not limited to general and local economic conditions, changing levels of competition within certain industries and markets, changes in interest rates, changes in legislation or regulation, and other economic, competitive, governmental, regulatory and technological factors affecting a portfolio’s operations that could cause actual results to differ materially from projected results. Such statements are forward-looking in nature and involves a number of known and unknown risks, uncertainties and other factors, and accordingly, actual results may differ materially from those reflected or contemplated in such forward-looking statements. Prospective investors are cautioned not to place undue reliance on any forward-looking statements or examples. None of SL Advisors LLC or any of its affiliates or principals nor any other individual or entity assumes any obligation to update any forward-looking statements as a result of new information, subsequent events or any other circumstances. All statements made herein speak only as of the date that they were made. r
Certain hyperlinks or referenced websites on the Site, if any, are for your convenience and forward you to third parties’ websites, which generally are recognized by their top level domain name. Any descriptions of, references to, or links to other products, publications or services does not constitute an endorsement, authorization, sponsorship by or affiliation with SL Advisors LLC with respect to any linked site or its sponsor, unless expressly stated by SL Advisors LLC. Any such information, products or sites have not necessarily been reviewed by SL Advisors LLC and are provided or maintained by third parties over whom SL Advisors LLC exercise no control. SL Advisors LLC expressly disclaim any responsibility for the content, the accuracy of the information, and/or quality of products or services provided by or advertised on these third-party sites.
All investment strategies have the potential for profit or loss. Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment will be suitable or profitable for a client’s investment portfolio.
Past performance of the American Energy Independence Index is not indicative of future returns.