Lower-carbon future? Try natural gas.

By Tony Hayward
Friday, November 6, 2009

The public debate on climate change can seem beguilingly simple: alternative fuels good; fossil fuels bad. If we burn less of the latter and use more of the former, the argument goes, we will be well on our way to a lower-carbon future.

But shaping our energy future will be more complex than simply using less fossil fuel and more alternatives. Getting to a lower-carbon world while also providing the increasing energy needed to power a growing economy requires a more nuanced approach.

Renewable energy sources -- wind, solar, biofuels -- have an important role, and BP, the energy company I head, is investing significantly in all. Still, the shift to alternatives can't happen overnight. Global energy needs and the sheer scale of our business make this impossible.

The issue, then, is not a choice between fossil fuels and alternatives but, rather, what combination can achieve the fastest carbon reduction at the lowest possible cost using available technology?

Answering that question requires recognizing that not all fossil fuels are created environmentally equal. We can reduce carbon emissions significantly if we burn cleaner, less-carbon-intensive fossil fuels while also moving in a deliberate and affordable way toward alternatives and increased efficiency. Fortunately, there is a feasible path toward this goal.

Seriously tackling carbon dioxide levels over the next two decades will require addressing the use of electricity -- and coal in particular. Electricity generation produces 41 percent of the CO2 the United States emits, the largest single source. Coal generates half of all U.S. electricity, but 80 percent of the resulting carbon. Coal has to be cleaned up or replaced.

Is there a path to cleaner coal? In theory, yes: It's called carbon capture and storage (CCS), which essentially involves reverse-engineering a gas field, putting the carbon back in the ground rather than taking it out. (BP is a major investor in demonstration projects to test CCS at scale.) With government support, large-scale implementation of CCS could be achievable by roughly 2020. But even then, substantial costs will be associated with its use.

What about nuclear power? All-out nuclearization, a la France, would be costly and difficult to achieve in the United States, and the environmental payoff would be slow.

I don't think we can afford to wait. Until renewables gain a sizable share of the power sector, CCS becomes available, and nuclear energy ramps up, the only realistic option is increasing use of natural gas.

Gas is far and away the cleanest-burning fossil fuel, generating at least 50 percent less carbon per kilowatt hour than coal, and almost zero sulfur oxides, mercury and particulate ash. And because gas-fired power stations can be easily switched on and off (unlike those fired by coal), it is the ideal complement to intermittent power sources such as wind and solar.

Gas has long been held back by concerns about security of supply and the related issue of price volatility. But in the past four years, the landscape of the U.S. natural gas supply has been transformed. Thanks to the innovative use of technologies such as hydraulic-fracturing and horizontal drilling, reserves previously thought inaccessible are now recoverable.

This "unconventional" or "tight" gas -- for example, in shale deposits or coal-bed methane trapped in coal seams -- is abundantly available in many areas. Production from one field where the new techniques were pioneered, the Barnett Shale near Fort Worth, has itself almost turned around the production of natural gas in the United States.

Major discoveries have been made not only in such traditional gas-producing states as Texas and Louisiana but also in Ohio, Michigan, Pennsylvania and Upstate New York. BP estimates that the United States now has 50 to 100 years' supply of recoverable natural gas.

All this is highly significant for the rest of the world, because those technologies have only just begun to be applied to unconventional gas resources elsewhere.

We at BP believe there is the potential to find and develop tight gas and shale gas in North Africa and the Middle East, Europe, China and in the southern cone of Latin America. There's also potentially high-quality coal-bed methane in Australia and Southeast Asia.

So it's fair to ask: Why does the Waxman-Markey climate bill in the House all but ignore natural gas in favor of the most expensive fuels (wind and solar), as well as the most carbon-intensive (coal)?

An effective cap-and-trade mechanism would treat all carbon equally, whether it comes out of a tailpipe or a smokestack. A uniform, equitable carbon price would cost-effectively influence the choice between coal and gas, allowing informed investment in more sustainable and economically attractive gas plants.

The rewards for getting this right could be substantial. BP estimates that increased use of natural gas could achieve as much as 30 percent of Waxman-Markey's target CO2 reductions -- at a fraction of the cost of other options.

Natural gas is frequently described as a "bridge fuel" to a lower-carbon future. By using existing technology and infrastructure, it can be much more. It can be a "destination fuel." Natural gas is here. It's cleaner. It's affordable.

What are we waiting for?

The writer is chief executive of BP, which operates in more than 100 countries and is the United States' largest oil and gas producer.

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