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Challenges to Globalizing Natural Gas

Natural Gas Potential

Natural gas is the cleanest burning fossil fuelfor toxic air pollutants andit emits about half the greenhouse gases of coal. With future oil supplies in question, coal falling out of favor due to environmental concerns, and energy demand expected to increase, natural gas usage may grow. However, transportation of natural gas poses a problem: Pipelines routed through entire countries can pose geographic, financial, and geopolitical challenges. As a result, the natural gas trade has remained overwhelmingly regional. Liquefied natural gas (LNG) gives producers the ability to transport gas over large distances without having to rely on pipelines, but the liquefaction process requires significant infrastructure. Some experts predict LNG will take a growing share of the natural gas trade but note that natural gas markets will likely remain overwhelmingly regional.

Production and Flows

The world produced and consumed more than 100 trillion cubic feet (Excel doc) of natural gas in 2006. North America, Europe, and Eurasia make up more than two-thirds of all natural gas consumption. Current projections suggest global consumption as a whole will rise to 158 trillion cubic feet by 2030. Only about one-third of natural gas is exported, primarily to countries within the region of production. Experts predict that future increases in exported natural gas will come from LNG, making gas a more globalized commodity.

Unlike oil, natural gas production is not dominated by the places with the largest natural gas reserves. Iran and Qatar have the second- and third-largest reserves after Russia, but both provide only a small fraction of the world's total production--neither country ranks in the top ten global producers. Nearly half of all production takes place in Russia, the United States, and Canada--with U.S. and Russian production dominating.

The Challenges of Pipelines

Pipelines...

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