Natural Gas: A potential solution to foreign oil and a source for US Job growth
The US’s future job outlook, dependence on foreign oil, and the emergence of natural gas have been popular topics dominating news headlines and political debates. Due to the recent discoveries of gas reserves in Texas and the Appalachian Basin, many energy experts are pointing to natural gas as the cheapest option for new power generation. In a recent Bloomberg energy report, many energy companies are scrapping new coal and alternative energy projects because of the surplus in natural gas supplies, most notably, CMS Energy’s cancellation of a $2B coal plant and NextEra Energy deciding to halt 2013 wind projects. Recent studies have estimated that the U.S. has more than 2,200 trillion cubic feet of gas reserves which can be enough to meet nearly 100 years of current U.S. natural-gas demand.
Map Source: Wall St Journal
If the US is able to increase its use of this domestic energy source and widen the application of natural gas, especially into transportation, the large natural gas reserves can help offset the country’s dependence on imported oil. In a 2009 report by the Energy Information Administration, natural gas only accounted for 25% of the Country’s energy supply, of which only 3% was used for transportation applications. When breaking down oil’s contribution, petroleum energy sources accounted for 37% of the overall supply. In addition, there is no surprise to oil being the primary transportation fuel source, where 72% of its supply is set aside for transportation.
From an investment perspective, major energy stakeholders including utility companies, auto makers, leading research universities and even VCs should focus a portion of their R&D spend on developing emerging technologies that can widen the use of natural gas. Currently there is a high cost to retrofit current transportation infrastructure, which is built around gasoline and oil. Based on some estimates, the cost to retrofit a mid-size truck to run on natural gas are as high as $75,000. New technologies could be focused on reducing retro-fit cost, engine design, refueling stations, and railways.
Finally, in regards to job creation, US consumption has steadily increased while the country has maintained a low level of gas imports. Based on DOE projections, the US consumes about 69 billion cubic feet of natural gas every day. Currently, only 4.2 billion of the 69 Billion cubic feet is imported (3 Billion comes from our neighbors to the north). Extracting, refining, and transorting gas to market is a labor intensive end-to-end process that requires a skilled work force. These main street type of jobs are exactly what the country needs to drive productivity and the economy. Considering the consumption of natural gas is expected to increase, the US should continue its trend of lowering imports and focus on meeting the growing consumption demands by developing domestic wells. Drilling companies, community colleges and both National and Regional governments should focus on increasing the current workforce, training workers, and meeting future growth demands.
Bernard
March 13, 2012
