Entering the Methane Age –Prospects and Challenges for Developing Countries

R K PachauriDirector General – TERIChairman – IPCC

World Gas Conference, 2003Tokyo

Regional Shares in Commercial Energy Consumption

0.0

500.0

1000.0

1500.0

2000.0

2500.0

3000.0

1965 1969 1973 1977 1981 1985 1989 1993 1997 2001

North America

Asia-Pacific

Europe

FSU

S&C America

Middle East Africa

MTOE

BP, 2002

Share of Various Energy Sources in TPES

0 . 0

1 0 0 0 . 0

2 0 0 0 . 0

3 0 0 0 . 0

4 0 0 0 . 0

5 0 0 0 . 0

6 0 0 0 . 0

7 0 0 0 . 0

8 0 0 0 . 0

9 0 0 0 . 0

1 0 0 0 0 . 0

Oil

Gas

Coal

HydroNuclear

MTOE BP, 2002

Fuel Wise Decadal Growth Rates in TPES

1960s was the Oil decade– Natural Gas also witnessed high growth rate

Oil shocks shifted the focus to alternate fuels and stricter efficiency standards1990s saw a relaxed Fuel economy standards and overall economic slowdown

– Russia, Japan were main reasonsOverall, growth has been fuelled by Hydrocarbons

Fuel 1965-01 1965-70 1970-80 1980-90 1990-00Oil 2.34 8.07 2.82 0.54 1.15Gas 3.48 7.89 3.51 3.12 1.98Coal 1.17 0.89 1.57 2.24 -0.22Hydro 2.94 5.07 3.80 2.48 2.16Nuclear 13.76 24.72 24.85 10.89 2.59

CAGR (%)

BP, 2002

Problems with Oil Dependence

Proven Oil reserves (%)

Middle East65%

Rest of the World35%

0.00

10.00

20.00

30.00

40.00

50.00

60.00

70.00

80.00

90.00

1861186618711876188118861891189619011906191119161921192619311936194119461951195619611966197119761981198619911996

$/ bbl mod$/ bbl 1997

High dependence on Middle East

Volatile Oil prices

BP, 2002

BP, various issues

Alternative Fuel – Methane (in the form of Natural Gas)

World Gas consumption has grown at equal pace

-

500.0

1,000.0

1,500.0

2,000.0

2,500.0

1965 1969 1973 1977 1981 1985 1989 1993 1997 20010.0

2000.0

4000.0

6000.0

8000.0

10000.0

World gas consumption

Total commercial energy consumption

BP, 2002

MTOE MTOE

0

500

1000

1500

2000

2500

3000

3500

4000

4500

1970 1980 1990 2000 2010 2020 20300

5

10

15

20

25

30

What the Future Holds

Lower growth but from a higher baseIncreasing share of Gas till 2020, stagnant afterwards

Historical Projections

Average Annual Growth Rate – 4.45% Average Annual Growth Rate – 3.68%

Source: World Energy Outlook, 2002

World Gas Demand (MTOE)

Share of gas in TPES (%)

MTOE %

Principle Drivers for Gas Demand

Distributed electricity generation– Institutional reforms in the electricity sector in several

countries have popularized the concept• Time of day pricing that places premium on peak load power

generation• Merchant Power Plants in USA

– Cogeneration has become popular for energy conservation• Not restricted to industries

– Declining costs and increasing efficiency of CCGTsSecured supplies as compared to Crude Oil– Physical availability– Low volatility in prices– Dedicated infrastructure

….Contd.

Declining costs– Of transporting Gas from field to consumer

location• Has facilitated development of offshore fields

– Of LNG chain• Has facilitated Gas trade

Toughening Environmental norms

Sectoral Gas Consumption

Power generation demand is the main driver

0

500

1000

1500

2000

2500

3000

3500

4000

4500

1980 1990 2000 2010 2020 2030

Other sectorsGTLPower GenerationTransportIndustryResidential/Services

MTOE

Where Will it Come From?

FSU may provide a counter-weight to Middle East

North America5% S & C America

5%

FSU36%

Middle East36%

Africa7%

Asia Pacif ic8%

Europe3%

Proven Gas reserves (%)

North America13%

S & C America8%

Europe6%

FSU30%

Middle East25%

Africa8%

Asia Pacif ic10%

Undiscovered mean Gas reserves (%)

Source: USGS

Source: BP, 2002

Other Supply Sources for Methane

Natural Gas is not the only source of Methane– Coal Bed Methane– Biomass

• Holds great promise for developing countries

– Coal liquefaction technology has not developed much since World War II

• Though Methane is industrially produced by destructive distillation of Bituminous Coal and by Coal Carbonization

Biomass as a Source of Methane

Non-Commercial energy still plays an important role in meeting rural energy needs– Biogas used for cooking– Sludge used as manure

Contributes 9-13 % of world’s energy supply– 35% for developing countries– In the world’s poorest countries, biomass accounts for

up to 90% of the energy supplyWastes provides ample opportunity for Methane production

Potential Contribution of Biomass

SourceTime

Frame

Total Projected global energy

demand

Contribution of biomass to

energy demand %exajoules a year exajoules a year

RIGES 2025 395 145 372050 561 206 37

SHELL 2060a 1500 220 152060b 900 200 22

WEC 2050 671-1057 94-157 142100 895-1880 132-215 14-11

Greenpeac 2050 610 114 192100 986 181 18

IPCC 2050 560 280 502100 710 325 46

Source: World Energy Assessment, WEC

How is Biogas Produced?

Biogas is produced by organic wastes and biomass fermentation.– Takes place in the absence of Oxygen

DECOMPOSITION (FERMENTATION)

Aerobic Anaerobic

Natural Artificial Natural Artificial

Organic Matter with Potential for Biogas Generation

Crop waste– Sugarcane trash, Weeds, Corn and related Crop Stubble, Straw,

Spoiled FodderWastes of animal origin– Cattle shed wastes, Poultry litter, Droppings, Slaughterhouse

waste, Leather and Wool wasteWastes of human origin– Feces, urine, refuse

Byproducts and wastes from agri-based industry– Oil cakes, Bagasse, Tobacco wastes, Food and Vegetable

processing wastes, Press mud from Sugar factories, Tea wasteForest litter – Twigs, Bark, Branches, Leaves

Advantages of Biogas Production

CROP RESIDUESDOMESTIC WASTES

ANIMAL WASTESNIGHT SOIL

METHANEGENERATOR

SludgeResidue F u e l

Returned to soil as fertiliser

Mechanical EnergyHeat & LightElectrical Energy

Three Direct Benefits

Production of energy resource that can be stored and used more efficientlyCreation of a stabilized residue that retains the fertilizer value of the original materialSaving of amount of energy required to produce an equivalent amount of nitrogen-containing fertilizer by synthetic process

Economics of Biomass Energy Systems

Is a profitable alternative mainly when cheap or even negative cost biomass residues or wastes are available– To make it competitive, further optimization may be

requiredPlantation biomass costs are already favorable– Costs are much higher in developing countries

With biomass prices of $2/GJ, state of art Combustion technology at 40-60 MW scale can generate electricity at $0.05-0.06/Kwh– May be competitive with Fossil Fuels for larger plants

Implementation Issues and Barriers

Uncompetitive costs – Technological development– Fiscal measures like Carbon taxes

Need for efficient conversion technologies– Further development of gasification technologies for

cheaper production of Methanol and HydrogenDevelopment of dedicated Fuel supply system– Higher yields, greater pest resistance, better

management, reduced inputs and further development of machinery

Efficiency– Fairly large land surfaces are required to produce

substantial amount of energy

….Contd.

– Low energy density of biomass makes transportation a big issue

Public acceptability– Needed changes in land use, crops, and

landscape might incite public resistanceCompetition for land use– Biomass production for energy should not

conflict with food production

Thank You