Natural Gas: The Green Fuel of the Future
R.S. Taylor, Halliburton; P. Tertzakian, ARC Financial Corporation; T. Wall, Apache Canada Limited;
M. Graham, Encana Corporation; P.J. Young, DYAD Consulting Limited; and S. Harbinson, Halliburton
Summary
As populations and economies continue to grow globally, energy
demand will grow proportionally. Extensive work by Tertzakian
(2007, 2009) has shown crude-oil supplies may not keep pace
with this increased demand. The shortfall must be met by other
energy sources.
Only two current energy sources have the global capacity to, by
themselves, address increased energy demand in a timely manner.
These are natural gas and coal.
Traditionally, the major use of crude oil has been for process-
ing into transportation fuels, with lesser amounts being used for
petrochemicals and home heating. Natural gas and coal have been
used primarily for electrical generation and heating.
A pivotal transition will likely occur in which natural gas and
coal begin to see increased use as transportation fuels. A battle for
market share between primary fuels will likely ensue.
The objective of this paper is to present data comparing the
environmental impact of using methane vs. coal. A compelling case
for the use of natural gas as the future “green fuel” emerges.
SWOT Analysis
A strengths, weaknesses, opportunities, and threats (SWOT) analy-
sis was undertaken to gain a more complete understanding of the
current Canadian natural-gas market.
Strengths
Western Canadian Natural-Gas Potential. Recent discoveries in
the Horn River basin and the Montney play are expected to approx-
imtely triple British Columbia natural-gas production from ≈2.8
B/D currently to ≈7.6 B/D within approximately the next 10 years.
The natural-gas resource base in British Columbia is expected to be
on the scale of other major liquefied-natural-gas (LNG)-producing
nations (e.g., Indonesia and Australia). All of the major Canadian
exploration companies, together with several of the super majors
and some independents, are developing natural gas in the Montney
and Horn River shale plays (Figs. 1 and 2).
This added resource has been unlocked primarily through use
of horizontal drilling combined with multistage-fracturing treat-
ments. This has allowed these nanodarcy-permeability formations
to be produced at economic rates. Improvements in the efficiency
of technologies used to conduct the fracturing treatments now
routinely allow for eight to 10 major fracturing treatments to be
placed in 2 to 3 days using 24-hour operations (Fig. 3). Multiple
transverse fractures are created along a horizontal lateral wellbore
to provide the necessary exposed rock surface area (kh) for eco-
nomic drainage rates (Fig. 4).
Tertzakian captures the potential that shale gas provides in his
book The End of Energy Obesity (Tertzakian 2009):
“To meet growing appetites around the world and address the
need to shift to a healthier energy diet with the greatest leverage
possible, we need to identify a fuel that is low carb, plentiful, scal-
able, and affordable. As fate would have it, we are fortunate that
such a fuel is emerging and is already being added to our diet in
greater proportion, especially in North America. Actually, it’s an
old fuel, but we are finding new ways to accessing and using it.
We used to call it ‘nature’s gas’.”
Copyright © 2012 Society of Petroleum Engineers
This paper was accepted for presentation at the Canadian Unconventional Resources and
International Petroleum Conference held in Calgary, 19–21 October 2010, and revised for
publication. Original manuscript received for review 26 November 2010. Revised paper
received for review 5 July 2011. Paper peer approved 8 July 2011 as SPE paper 136866.
May 2012 Journal of Canadian Petroleum Technology
Weaknesses
The North American gas market is oversupplied for current demand
in large part because of the success of new shale-gas developments
(e.g., those in British Columbia). In addition, numerous US shale-
gas plays have increased US domestic gas supply significantly and
compete with Canadian gas. The pace of development in North
America has remained strong in 2010 and threatens to saturate the
market further with gas.
North American gas prices are forecast to remain in the USD
4–6/Mcf range at the Henry Hub for approximately the next 2
years, a level that is barely economical for numerous shale plays
and is uneconomic in numerous coalbed-methane and conven-
tional-gas plays.
In addition, Canadian gas is disadvantaged for sales in the US
by additional pipeline-transportation costs to reach the compara-
tively distant market.
Opportunities
Global supply of crude oil is unlikely to meet future demand at
economic prices. High decline rates in existing major global oil
fields are projected to reduce total production significantly and cre-
ate an ever-increasing need for additional discoveries and supplies
simply to meet existing demand. When increased global demand
is factored in, at even modest rates, it becomes apparent that a
shortfall in supply is likely (Fig. 5).
Also, the number of large discoveries, referred to as elephants,
has been diminishing since a peak in the early 1960s. This is
evidenced by the extreme environments in which oil exploration
now occurs (Fig. 6).
Of the available alternative-energy sources, only natural gas
and coal are sufficiently scalable to fill the void. Renewable energy
sources represent only 0.3% of global supply and are therefore
not currently a practical means of meeting growing energy need,
which is largely for transportation purposes. Natural gas is in fact
the most environmentally acceptable means of facilitating future
energy sources (e.g., wind and solar power) because it can be
turned on at will to supplement production when the wind is not
blowing or the sun is not shining (Figs. 7 and 8).
As Tertzakian (2009) states, “One major reason why renewables
find it difficult to take away market share from incumbents is that
their ability to scale up is limited. It takes 1,500 two-megawatt
wind turbines to put out the same power as a single 1,000 mega-
watt nuclear power plant running 24/7. The reason we switched
away from windmills and water wheels to coal, oil, natural gas,
hydroelectricity, and nuclear power was because the latter are much
more scalable energy sources.”
Canada and Kuwait are essentially tied as having the highest
personal energy appetites at 73 BOE per person per year (BPY).
The United States consumes approximately 59 BPY and Australia
46. The average consumption of the countries Tertzakian (2009)
refers to as “Wealthy World” is 36 BPY (Fig. 9). However, con-
sumption in the major developing economies of the world is cur-
rently much more muted. China consumed only 11 BPY, Brazil 9
BPY, and India only 4 BPY in 2007. However, a growing desire
to own and operate a car has become evident in China in recent
years.
“If India and China continue to grow as expected their energy
consumption will put tremendous demands on existing oil supplies.
What the scales don’t give is a sense of the staggering population
issue. What happens when the weight of a few billion ‘Wanting’
World residents with hungry energy appetites start marching up
the staircase?” (Tertzakian 2009).
163
 Western Canadian Natural Gas Potential

Natural gas resource

base in British Recent discoveries in the Horn River basin and the Montney formation are expected to triple British
Columbia is expected Columbia production from ~2.8 Bcf/d currently to ~7.6 Bcf/d in the next 7–10 years.
to be on the scale of
Potential BC Raw Gas Production Forecast
other major LNG
producing nations 220
(e.g., Indonesia Utica
Horn River
and Australia). 200 Montney
Previous Canadian Projection
180
All of the major
Canadian exploration Bcf/d 160
companies together
with several of the 140
super majors are 120
developing natural gas
in the Montney and 100 140
127.6
Horn River shale plays. 2000 2003 2006 2009 2012 2015 2018 120
Source: Wood Mackenzie, Trust One Capital 100
80
57.6 57.6
60
40
20
0
2007 Gas Reserves • Horn River and Montney
Source: Credit Suisse Source: Canadian Gas Association

Fig. 1—Western Canada’s natural-gas potential.

China’s total per capita energy consumption has risen from
approximately 3 BPY in 1980 to 11 BPY in 2007. The rapid
increase in individual energy-consumption rate suggests that China
may soon start to consume closer to the global average of 36 BPY;
a doubling or even tripling of the 2007 rate. Given a population of
more than 1.3 billion, close to four times that of the US, the impact
of these increased consumption rates on global energy supply will
likely be pronounced (Fig. 10).
Next to crude oil, natural gas has the highest energy return
on energy invested (Fig. 11). This makes it an ideal choice to
replace crude oil for transportation applications. Tertzakian (2009)
addressed this potential.
“From the list of all the energy sources it’s simple to see the
standouts (Fig. 11). Among the hydrocarbons, natural gas is clearly
the second-best option after crude oil. For good reasons, it is
being talked about now in terms of a substitute for gasoline in our
transportation industry. If we are looking for the highest leverage
solution on the supply side, natural gas is the fuel of the future.
The biggest opportunity for natural gas will be if it can penetrate
the transportation market.”
Natural gas can replace crude oil effectively for transportation
purposes in one of three ways.
• Natural gas can be used to generate electricity, which in turn
requires electrically powered vehicles and the grid infrastructure
to supply this increased electrical demand. This is the most energy
efficient and safest choice and may be the primary method in which
natural gas is used for transportation in the future. However, this
does require planning and significant changes in the design of
vehicles and supporting infrastructure.
• Natural gas can be used as a feedstock for gas-to-liquids
technology based on the Fischer-Tropsch process, in which natural
gas is first converted primarily to carbon monoxide and hydrogen
gases. These gases, referred to as syn-gas, are then catalytically
converted to a high-quality synthetic crude oil of custom-designed

Total Gas in Place Resources, 3,195 Tcf (111×1012 m3)

692
1111

801

1311

Conventional (remaining)
NGC/CBM
Tight Gas
Shale Gas

Estimates from Petrel Robertson Resource Assessment Study completed for CSUG April 2010

Fig. 2—Canada’s natural-gas-resource base.

164 May 2012 Journal of Canadian Petroleum Technology

 Fig. 3—Shale-gas fracturing treatment.

molecular-weight distribution. However, this process requires spe-
cialized plants that are expensive and time consuming to build.
Like the electrically powered vehicle option, this requires signifi-
cant infrastructure and advance planning.
• Natural gas can be used in compressed-natural-gas (CNG)
vehicles. This method of usage is quite low in cost and typically
requires only a short time to convert an existing gasoline- or diesel-
powered vehicle. This technology is already successfully used in
numerous parts of the world, including Europe and South America.
Vehicles used by Parks Canada at Banff National Park Tunnel
Mountain Campground in Banff, Alberta, are now fueled by CNG.
However, these vehicles have a limited range of approximately 200
km. These were conversions of normal Ford F150 pickup trucks,
emphasizing the ability to quickly switch existing vehicles to natu-
ral gas. However, there is currently limited availability of CNG.
It will, however, be possible in the future to add this capability to

Fig. 4—Completion efficiencies of multiple transverse fractures.

May 2012 Journal of Canadian Petroleum Technology 165

 120

New oil required to

meet new demand
100 at 1% growth

Historical spare
capacity
80 New oil required
Production, mmB/D

to offset decline

60

40
Oil produced Future oil production
from 1970 to 2005 off existing base

20

–
1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020
Time, years
Source: Adapted from U.S. Energy Information Agency, the International Energy Agency and ARC Financial

Fig. 5—The challenge of supplying global oil-demand growth: historical and future components of supply, demand, and spare
capacity.

existing gas stations. The ability to convert existing vehicles to
CNG could prove critical if oil prices spike quickly again and an
immediate alternative is needed (Fig. 12).
Natural gas, therefore, presents an ideal solution to the prob-
lem of diminishing supplies of crude oil for transportation use.
However, for Canada to benefit from this, it needs to be able to
access global markets and obtain global pricing. The key to this
for the future will be LNG exports through the proposed Kitimat
LNG export facility and others off the west coast of Canada
(Fig. 13). Several key existing Asian LNG contracts expire in
the 2014 – 2016 time frame, creating new opportunities for
LNG exports.
The Kitimat LNG terminal, operated by Apache Canada Ltd.,
will be located in Bish Cove along the Douglas Channel near
Kitimat, British Columbia—an established industrial port with
year-round access. It is expected to fuel approximately one LNG
tanker per week containing approximately 3 Bcf of gas. The facil-
ity is being designed to accommodate future expansion of export

All Regions
60

GOM
50 Shelf Prudhoe Bay,
Saudi Arabia,
North Sea
Kuwait
Billion Barrels per Year

40

30 Persia,
Deepwater GOM,
Iraq
Brazil and
West Africa
20

10

0
1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000
Time, years
Source: Adapted from Harper (2003) and Oil & Gas Journal (2004)

Fig. 6—Total volume of new oil discoveries worldwide by year, 1900–2004.

166 May 2012 Journal of Canadian Petroleum Technology

 Annual Power Generation, Trillion KWh
Hydro 6% Renewables* 0.3%
20 Renewable
Nuclear 5%
18
16
Nuclear
14
Oil 37% 12 Hydroelectric
Coal 28% 10
8
Conventional
6
Thermal
4
Natural Gas 23% 2

*Note: 1990 1995 2000 2005

Renewables include Geothermal, Solar, Wind, Source: ARC Financial Research
Wood, and Waste, in Power Generation Source: ARC Financial Research

Fig. 8—World electricity consumption by primary energy source,

Fig. 7—Market share of world primary energy sources.
1990–2005.

80
Energy Consumption, BOE/person/yr (BPY)

70

60

50

40 Wealthy World Average=36 BPY

30

20

10

Brazil
Kuwait
Canada

USA
Benelux
Urban OECD
S. Arabia
Australia

France
Netherlands
Finland
South Korea
Russia
OECD
Japan

Austria
Germany
Hong Kong
UK
Denmark
Urban China
Italy
Iran
Venezuela
Argentina
World
Mexico
China

Non-OECD
Columbia
India
Source: ARC Financial Research

Fig. 9—Comparison of personal energy appetites for various countries.

2007
14
Total Energy Consumption, Billion BOE/yr

12

10
1980 1990 2000

1,000 1,100 1,200 1,300

Population of China, millions
Source: ARC Financial Research

Fig. 10—China’s total energy consumption vs. population, 1980–2007.

May 2012 Journal of Canadian Petroleum Technology 167

 25

20

15
EROIE Multiple, x

10

5
il

as

al

ds

l
no

no

se

no
O

in

rP
m
lG

an

ie
ha

ha

ha
er

la

od
il S
ra

Et

Et

Et
th

So

Bi
tu

eo

O
sic

ne

rn
Na

Co
ca
lo
llu

r
ga
Ce

Su Source: ARC Financial Research

Fig. 11—Average energy return on energy invested for various energy systems.

capacity. It is expected to be operational in late 2014 or early
2015 (Fig. 14).
The shipping route is well developed and has been used by the
industry for more than 40 years. The terminal’s deepwater charac-
teristic (> 45 m deep) provides ice-free, year-round shipping. No
dredging or breakwater is required, and the port will be able to
easily accommodate QMax vessels (Fig. 15).
Pipeline-specification gas will be supplied to the Kitimat
facility for liquefaction, a process whereby the gas is cooled to
approximately –162°C for transportation at 25 kPag. One vol-
ume of the liquid contains approximately 600 volumes of gas at
standard conditions. In the liquid state, it is odourless, colourless,
nontoxic, and noncorrosive.
The Kitimat LNG terminal presents exciting new commercial
opportunities because it will be the only gas-export facility in
North America to provide Canadian natural-gas producers access
to LNG markets and provide Asian utilities with a diverse, secure,
and politically stable supply source (Fig. 16).
Pacific Trail Pipelines is developing the natural-gas pipeline-
system expansion from Summitt Lake to Kitimat, British Colum-
bia, to serve the Kitimat LNG export terminal. This will connect
the current Horn River and Montney shale-gas plays to Kitimat
(Fig. 17).
LNG prices in Asia have historically been the highest in the
world, and the fundamentals in the Asia region are expected to keep
this structure in place. The price for LNG delivered into Asia is

Fig. 12—Parks Canada vehicle powered by CNG.

168 May 2012 Journal of Canadian Petroleum Technology

 Fig. 13—Kitimat LNG: Canadian gas is going global.

normally based on the international price for crude oil. The crude-
oil price index used in Asia is the Japan customs-cleared price or
Japanese crude cocktail (JCC). The JCC has closely tracked to
West Texas Intermediate oil pricing. Oil-indexed pricing will con-
tinue for the longer term because it provides price transparency to
the major Asian buyers. Pricing in the Atlantic basin should still
reflect oil indexing (% of Brent crude), but may also reference gas
pricing at the national balancing point (Fig. 18).
Kitimat has compelling economics because it provides an
option to access strategic markets in the Pacific basin and to take
advantage of the established differential in natural-gas pricing
between North America and Asia. The structural price-spread dif-
ference between Asia and North America is long term in nature.
Long-term LNG contracts allow western Canadian producers to
link gas prices to an index linked to crude prices. Pricing dif-
ferentials of USD 8–10 between LNG pricing and the Canadian
market price were typical in 2008 (Fig. 19). Costs to transport
Canadian natural gas to Kitimat and liquefy it are estimated to be
in the CDN 3 to 4 range. Therefore, an overall favourable price
differential exists.
In summary, the Kitimat LNG facility will provide (Fig. 20)
producers with

Kitimat LNG Terminal—Facility Overview

The Kitimat LNG Terminal will be located in Bish Cove along the Douglas Channel near
Kitimat LNG has all Kitimat, BC, an established industrial port.
Federal and Provincial
Environmental Facility Overview
Assessment approvals Send-out Capacity: 5.0 mmtpa (∼700 mmcf/d)
and is moving forward Max LNG Carrier Capacity: 1×266,000 m2
with FEED process. Storage Tanks: 2×226,000 m2
Shipments Expected: 5-6 shipments/month
First Nations Economic Environmental Certificates: Provincial and Federal permits received
Benefits Agreements Other Project Components: Access Road/Berthing for Tug Boats/Construction Jetty
in place for terminal Commercial Operations Begin: 2014
and pipeline. Total LNG Terminal Project Costs: ∼CDN 3.0 Billion
Front-End Engineering Design: To Be Completed

Fig. 14—Kitimat-terminal specifications (from Apache literature).

May 2012 Journal of Canadian Petroleum Technology 169

 Project Overview
Liquefaction: Overview of the Douglas Channel

The Terminal will be located in Bish

Cove along the Douglas Channel near
Kitimat, B.C., an established industrial
port with year-round access.

Well developed shipping route used

by industry for more than 40 years

Deepwater characteristic (more than

150 ft) provides ice-free year-round
shipping

No dredging or breakwater required

Easily able to accommodate QMax

vessels

Fig. 15—Kitimat-terminal location.

• An outlet to new strategic markets for North American For end users it
natural gas • Provides LNG buyers with a new LNG source
• The ability to access the established natural-gas price differ- • Provides LNG a low-risk geopolitical environment
ential between North American and Asian pricing, with resulting • Provides the ability to access the established natural-gas price
robust economics differential between North American and Asia for robust project
• The most cost-effective method of entry into international economics
gas markets
• The ability for Canadian producers to include LNG export Threats
pricing in their portfolio Natural gas faces a well-established competitor for market share—
• Stimulation of projects to develop natural-gas reserves in coal. The total energy diet of the developing nations (wanting
western Canada. countries) shows a clear reliance on both coal and natural gas to
Commercial Opportunities
The Kitimat LNG Terminal will be the only gas export in North America to provide:
■ Canadian natural gas producers access to LNG markets
■ Asian utilities with a diverse, secure, and politically stable supply source

LNG Customers Canadian Gas

• Japanese, Korean,
Suppliers
Chinese Utilities • Gas Producers
• International LNG • Gas Marketers
Players
• Commodity Banks Liquefaction Plant
Tolling Fee
LNG PSA

Fig. 16—Kitimat-terminal commercial opportunities.

170 May 2012 Journal of Canadian Petroleum Technology

 Project Overview
PTP
PTP is developing the natural gas pipeline system expansion from Summitt Lake to
Kitimat, British Columbia, to serve Kitimat LNG Incorporated’s export terminal.
PTP will partially loop the existing PNG pipeline between Summit Lake and Kitimat
to increase the system’s capacity through a more direct pipeline route.
PTP will provide the Kitimat Terminal with a direct connection to the Spectra Energy
Transmission pipeline system at Summit Lake (Station 4A0 and access to natural
gas supplies in British Columbia and Alberta.

Spectra Westcoast
PTP
Alliance Pipeline
TCPL Nova
TCPL GTN
Williams NWP
PG&E Transmission
Southern Crossing

Fig. 17—Pacific Trail Pipelines.

meet future energy demand in the face of constrained crude-oil
supplies (Fig. 21).
While natural gas provides clear advantages in terms of energy
efficiency and environmental impact, these facts are not always
well known by the general public. It becomes the responsibility
of our industry to clearly identify and market the advantages of
natural gas over coal; therefore, natural gas (methane) is observed
as the “green fuel of the future.”
With that goal in mind, it is useful to examine comparative
data. Fig. 22 shows increasing energy efficiency for natural gas
in the 40% region. Coal, on the other hand, decreased in energy
efficiency from 29% in 1995 to 28% in 2005, and emissions regula-
tions were strengthened.
Regarding comparative emissions (Fig. 23),
• CO2-greenhouse-gas emissions are 1.8 times higher with coal
than those of natural gas.
• Carbon monoxide is 5.2 times higher with coal.
• Nitrogen oxides are 5.0 times higher with coal.
• Sulfur dioxide is 2,591 times higher with coal.
• Particulates are 392 times higher with coal.

LNG Pricing Fundamentals

Pacific basin Gas prices in Asia have historically been the highest in the world and the fundamentals
in the Asia region are expected to continue to keep this structure in place
Oil indexed pricing will
continue for the longer The price of LNG delivered into Asia is normally based on the international price of
term—because it provides crude oil, which is the subsitute for gas
price transparency to the
major Asian buyers. The crude oil price index used in Asia is the Japan Customs Cleared Price or Japanese
Crude Cocktail (JCC)
Atlantic basin The JCC tracks closely to the WTI oil pricing
Pricing in the Atlantic
basin will still reflect oil
indexing (% of Brent
Crude) but may also
reference gas pricing at
the National Balancing
Point

Spectra Westcoast
PTP
Alliance Pipeline
TCPL Nova
TCPL GTN
Williams NWP
PG&E Transmission
Southern Crossing

Fig. 18—Natural-gas pricing.

May 2012 Journal of Canadian Petroleum Technology 171

 Compelling Economics

Kitimat provides an option to access strategic market in the Pacific basin and to take
Structural price advantage of established differential in natural gas pricing between North America and Asia.
spread difference
between Asia and Pricing Differential between LNG and Canadian Market Price
North America long
term in nature. CDN 12
CDN 10
Long-term LNG CDN 8
contracts provide CDN 6
western Canadian CDN 4
producers to link CDN 2
gas prices to an oil Differential–Implied LNG Price–Western Canada Gas Price
CDN 0
linked index. 1/1/07 4/2/07 7/2/07 10/2/07 1/1/08 4/2/08 7/2/08 10/1/08 1/1/09
Historical price based on rating 52 weeks average

LNG Price and Canadian Market Price

CDN 20
Western Canada Gas Prices
CDN 15 Implied LNG Price

CDN 10

CDN 5

CDN 0
1/1/07 4/2/07 7/2/07 10/2/07 1/1/08 4/2/08 7/2/08 10/1/08 1/1/09
Historical price based on rating 52 weeks average

Source: Bloomberg

Fig. 19—Economics of Kitimat LNG facility.

• Mercury emissions are nonexistent with natural gas, but are
a common attribute of coal emissions.
The US Environmental Protection Agency (EPA) Office of Air
Quality Planning and Standards published a nationwide study of
utility emissions in which emissions of 13 hazardous air pollutants
were quantified in 1990, 1994, and 2010 for coal, oil, and natural gas
(Table 1). Coal is clearly the worst and natural gas the best in terms
of reduced emissions. The comparisons are actually quite staggering,
making it clear that conversion of coal-fired plants to natural gas
is the most effective method to meet more-stringent environmental
regulations (e.g., those agreed to in the 2010 G-20 Toronto summit).
Some of the most outstanding comparisons from this study are:
• Arsenic: 64.4 t/a from coal in 2010 compared with 0.25 t/a
from natural gas
• Hydrogen chloride gas: 140 614 t (acid gas and acid rain)
from coal plants compared with no HCl from natural-gas-powered
plants
• Hydrogen fluoride acid gas: 23 597 t from coal plants com-
pared with no HF measured in natural-gas plants
• Mercury: 54.4 t from coal plants compared with 0.022 t from
natural-gas plants, a difference of 2,500 times or 250,000%
Further studies by the EPA have shown that even oil-fired
plants provide elevated cancer risks, in which they correlated the
cancer risk to concentrations of airborne metal and radionuclides
(Table 2). As can be observed in Table 1, use of natural gas will
reduce concentrations of these metals significantly, whereas use
of coal will increase concentrations beyond those observed with
oil-fired plants.

Canadian LNG Exports?

The Kitimat LNG Facility will provide:

Producers:
■ An outlet to new strategic market for North American natural gas producers
■ The ability to access the established natural gas price differential between North America and Asia
provides robust project economics
■ The most cost-effective entry to international gas markets
■ Canadian producers can include LNG export pricing in their porfolio
■ Stimulates the development of additional gas reserves in Western Canada
End Users:
■ Provides LNG buyers a new LNG supply source
■ LNG from a low-risk geopolitical environment
■ The ability to access the established natural gas price differential between North America and Asia
provides robust project economics

Fig. 20—Kitimat opportunities.

172 May 2012 Journal of Canadian Petroleum Technology

 50 2001

Energy Consumption, Billions BOE/yr

Natural
40
Gas

Nuclear
30

Coal
20

10 Oil
Hydro

1965 1970 1975 1980 1985 1990 1995 2000 2005

Source: ARC Financial Research

Fig. 21—Total energy appetite and diet of Wanting World countries.

Table 3 shows comparative emissions from natural-gas- • If 5% of heavy vehicles in Canada operated on natural gas,
(methane-), oil-, and coal-fired plants normalized to the same gas consumption would increase by 53 Bcf or 1.5% of current
number of megawatts of power generated (EPA data). Pollutants domestic gas use per year.
(e.g., arsenic) are much higher with coal than with natural gas. • Greenhouse-gas emissions from heavy diesel vehicles would
Numerous pollutants present in coal and oil were not detected decrease by 795 k t/a.
with natural gas. Tertzakian comments on this in The End of Energy Obesity
Natural gas is obviously superior to coal in terms of toxic pol- (Tertzakian 2009):
lutants (Fig. 23, Tables 1 and 2), but of equal or greater significance “Both coal and oil are now disadvantaged, though for different
is the greenhouse-gas impact of coal vs. natural gas. In 2006, the reasons. Society wants to turn away from coal because it is a high
total man-made CO2 emitted in the US was 5,752,289 × 103 t. The carb fuel…. The emissions of CO2 and other greenhouse gases are
US Department of Energy data from 1999 show coal-fired electri- becoming less and less acceptable…. With pressure for businesses
cal plants generated 1,881,571 × 106 kW-h with a CO2 output of in the West to reduce carbon emissions, coal’s position as a domi-
1,787,910 × 103 t. In comparison, natural-gas-fired plants generated nant fuel in our energy diet is being challenged.”
562,433 × 106 kW-h with a CO2 output of 337,004 × 103 t. There-
fore, if all the coal-fired plants were converted to natural gas, the Conclusions
CO2 output in the United States would decrease by 681,108 × 103 • Growth in global energy demand is anticipated, particularly in
t or greater, once the efficiency spread change between coal and rapidly expanding economies (e.g., those of China and India).
natural gas between 1999 and 2006 was included in the calculation • Economic supplies of crude oil will not be able to meet future
(Fig. 22). This is an 11.5% reduction in total CO2 emissions for demand. Natural gas and coal are the only two alternatives that
the United States, almost reaching the Kyoto target of 12.5% and have sufficient scalability to fill this increased demand, primarily
more than halfway to the suggested EU target of 20%. for transportation purposes.
As Dawson (2010) indicated in his Canadian Society for
Unconventional Resources (CSUR) publication titled “Cross Can-
ada Check Up: Unconventional Gas Emerging Opportunities and FOSSIL FUEL EMISSION LEVELS
Status of Activity,” Pounds per Billion Btu of Energy Input

POLLUTANT NATURAL GAS BROWN COAL

Efficiency of Electricity Generation

41% Natural Gas

Carbon Dioxide 117,000 208,000
39%
Carbon Monoxide 40 208
37%
Nitrogen Oxides 92 457
35%
Sulfur Dioxide 1 2,591
33%
Particulates 7 2,744
31%
Coal Mercury 0.000 0.016
29%

27% Fig. 23—Natural gas vs. coal: undoubtedly, high-efficiency natu-

1995 1997 1999 2001 2003 2005 ral-gas-fired power stations can produce up to 70% lower green-
house-gas emissions than existing brown-coal-fired generators
Source: ARC Financial Research per table, and less than half of the greenhouse-gas emissions of
the latest technology black-coal-fired power stations. Notice the
Fig. 22—US power-plant efficiency trends for natural gas and distinction between black and brown coal; however, how much
coal. less CO2 exactly also depends upon the type of gas-fired station.

May 2012 Journal of Canadian Petroleum Technology 173

 TABLE 1—NATIONWIDE UTILITY EMISSIONS FOR 13 PRIORITY HAZARDOUS AIR POLLUTANTS (HAPs)

Nationwide HAP Emission Estimates (tons/a)**

Coal Oil Natural Gas

HAP 1990 1994 2010 1990 1994 2010 1990 1994 2010
Arsenic 61 56 71 5 4 3 0.15 0.18 0.25
Beryllium 7.1 7.9 8.2 0.46 0.4 0.23 NM
†
NM NM
Cadmium 3.3 3.2 3.8 1.7 1.1 0.9 - - -
Chromium 73 62 87 4.7 3.9 2.4 - - -
Lead 75 62 87 11 8.9 5.4 0.43 0.47 0.68
Manganese 164 168 219 9.3 7.3 4.7 - - -
Mercury 46 51 60 0.25 0.2 0.13 0.0015 0.0017 0.024
Nickel 58 52 69 390 320 200 2.2 2.4 3.5
Hydrogen 143 000 134 000 155 000 2900 2100 1500 NM NM NM
Chloride
Hydrogen 20 000 23 000 26 000 140 280 73 NM NM NM
Flouride
Acrolein 25 27 34 NM NM NM NM NM NM
††
Dioxins 0.000097 0.00012 0.00020 1×1 0
–5
9×10
–6
3×10
–5
NM NM NM
Formaldehyde 35 29 45 19 9.3 9.5 36 39 57
*Radionuclides are the one priority HAP not included on this table because radionuclide emissions are measures in different units (i.e., curies/yr) and, therefore, would
not provide a relevant comparison to the other HAPs shown.
**The emissions estimates in this table are derived from model projections based on a limited sample of specific boiler types a nd control scenarios. Therefore, there
are uncertainties in these numbers.
†
NM=Not measured.
††
These emissions estimates were calculated using the toxic equivalency (TEQ) approach, which is based on the summation of the emissions of each congener after
adjusting for toxicity relative to 2-, 3-, 7-, and 8-tetrachlorodibenxo-p-dioxin (i.e., 2-, 3-, 7-, 8-TCDD).

• Natural gas is more energy efficient than coal and emits much
smaller quantities of harmful emissions. Conversion of coal-fired
plants to natural gas could reduce total CO2 emissions in the US
by 11.5%, almost reaching the Kyoto target of 12.5% and more
than halfway to the suggested EU target of 20%.
• The Canadian natural-gas industry is well positioned to increase
natural-gas production and exports through new shale-gas resource
development and use of horizontal-well, multifrac stimulation
technology.
• LNG exports from the Kitimat terminal are anticipated to begin
in late 2014 or early 2015. This will improve the economics of
western Canadian gas production significantly and drive activity
to develop resources further.
• Natural gas faces strong competition for market share with coal.
However, emissions data and energy efficiencies provide com-
pelling data supporting the choice to use natural gas.
• It is up to the natural-gas industry to educate the general public
on the compelling reasons to support increased use of natural
gas as the green fuel of the future.
Acknowledgements
The authors thank Apache Canada Limited and Encana Corpora-
tion for their insights and graphics regarding future Canadian LNG
exports and the proposed Kitimat LNG export facility. We also
thank ARC Financial for permission to use the work and graphics
from Peter Tertzakian’s books. In addition, we thank Mike Dawson
with CSUR for his graphics and information and Halliburton for the
time and support necessary to research and prepare this paper.
References
Dawson, F.M. 2010. Cross Canada Check Up: Unconventional Gas Emerg-
ing Opportunities and Status of Activity. Presented at the CSUG
Technical Luncheon, Calgary, 12 May.
Tertzakian, P. 2007. A Thousand Barrels a Second: The Coming Oil Break
Point and the Challenges Facing an Energy Dependent World. New
York: McGraw Hill. ISBN-10: 0071492607.
Tertzakian, P. 2009. The End of Energy Obesity: Breaking Today’s Energy
Addiction for a Prosperous and Secure Tomorrow. Hoboken, New
Jersey: John Wiley & Sons.

TABLE 2—SUMMARY OF HIGH-END INHALATION CANCER- RISK ESTIMATES

BASED ON LOCAL ANALYSIS FOR OIL-FIRED UTILITIES FOR THE YEAR 1990
–5 –6
HAP Highest MIR* Population With Lifetime Risk>1×10 Number Plants With MIR 1×10
Nickel** 5×10
–5
110,000 11
Arsenic 1×10
–5
2,400 2
Radionuclides 1×10
–5
2,4000 2
Chromium 5×10
–6
2,300 1
Cadmium 2×10
–6
45 1
†
Total (Aggregate) 6×10
–5
110,000 11

*Estimated lifetime maximum individual risk (MIR) caused by inhalation exposure for the “highest risk” oil-fired plant. Based o n an uncertainty analysis, these estimates
are considered reasonable high-end estimates.
**The estimates for nickel and total HAPs are based on the assumption that the mix of nickel compounds is 50% as carcinogenic as nickel subsulfide.
†
Estimated risk caused by inhalation of the aggregate of HAPs assuming additivity of risk for 14 individual carcinogenic HAPs.

174 May 2012 Journal of Canadian Petroleum Technology

 TABLE 3—EPA STUDY NORMALIZED TO COAL MEGAWATTS DATA

Methane Coal Oil Coal/Methane Coal/Oil

Megawatts
325.00000 325.00000 325.00000 1.00
Fuel Consumption 3
29,166,666.66667 ft 600 000 ton/a 1,300,000 bbl
Arsenic (ton/a)
0.00041 0.05000 0.01259 123.08 3.97
Berillium (ton/a)
0.00810 0.00041 19.94
Cadmium (ton/a)
0.00230 0.02844 0.08
Chromium (ton/a)
0.11000 0.01259 8.73
Lead (ton/a)
0.02100 0.02844 0.74
Manganese (ton/a)
0.09200 0.03859 2.38
Mercury (ton/a)
0.04500 0.00244 18.46
Hydrogen Chloride (ton/a)
191.80000 19.09375 10.05
Hydrogen Flouride (ton/a)
14.31000 0.00000
2-, 3-, 7-, 8-Tetrachrodibenzo-p-dioxane
0.00000 0.00000 2.23
(TEQ) (ton/a)
N-Nitrosodimethylamine (ton/a)
0.00520 0.00000
Nickel (ton/a) 0.00555 3.43281
Formaldehyde (ton/a) 0.09073 0.00000

Robert Taylor is a senior technical professional manager with
Halliburton specializing in fracture and acidizing treatment
design and fluid development. In this role,he works with a team
dedicated to delivering optimum asset value through use of
advanced fracture and acidizing design and evaluation soft-
ware. Taylor has 33 years of industry experience in research
and management positions with 4 years international experi-
ence. He is a graduate of the University of Calgary and has
28 patents and 15 papers, 10 of which have been published
in JCPT within the last 5 years. Taylor is a Past President of the
Association of the Chemical Profession of Alberta and has
served as both a speaker and chair at several unconventional
gas conferences. He has also served on the Board of Directors
of the Petroleum Society of Canada.
Peter Tertzakian is Chief Energy Economist of ARC Financial
Corporation and author of the bestselling A Thousand Barrels a
Second: The Coming Oil Break Point and the Challenges Facing
an Energy Dependent World. Passionate about the history and
direction of energy in society, he blends three decades of
experience in geophysics, economics, technology, and finance
to constantly analyze energy trends. Over the years Tertzakian’s
prescient advice to corporate leaders, policy makers, and stu-
dents has earned him numerous accolades for his work, includ-
ing an asteroid in his name. Always questioning the consen-
sus view, Tertzakian writes a weekly journal, is often quoted or
observed in the media (including an appearance on The Daily
Show with Jon Stewart), and is a sought after speaker at events
around the world. His new book, The End of Energy Obesity:
Breaking Today’s Energy Addiction for a Prosperous and Secure
Tomorrow, is now available in bookstores around the world.
Timothy O. Wall was appointed Regional Vice President—
Canada and President of Apache Canada in 2009. He has
been Regional Vice President—Australia and Managing Director
of Apache Energy Limited since March of 2006. Wall joined
Apache in 1990 as an engineer in Houston, and moved to
Midland as Permian Basin District Manager in 1993. He became
Gulf Coast production manager in 1996, Country Manager in
China in 1997, Central Region Operations Manager in 2000,
Apache North Sea Operations Manager in 2004, and Australia
Deputy Managing Director and Operations Manager in 2005.
Wall holds a bachelor’s degree in petroleum engineering from
Texas A&M University.
Mike Graham is Executive Vice-President and President,
Canadian Division Encana. He is responsible for Encana’s
Canadian division resource play assets in British Columbia,
Alberta, and Atlantic Canada. This includes operations in the
Dawson Creek, Grande Prairie, Fort Nelson, Grande Cache,
Strathmore, Ponoka, Drumheller, and Calgary regions. Graham
joined an Encana predecessor company in 1986 and held
various positions in operations and engineering areas until
moving to the reservoir-engineering group. He was involved
with the development of the company’s Suffield and Primrose
interests, the AECO gas-storage facility and Encana’s entry
into the deep basin of Alberta and northeast British Columbia.
In 2006, Graham was appointed President of the Canadian
Region, which consolidated the company’s Canadian Foothills
and Canadian Plains Regions, and in 2007, he assumed lead-
ership of Encana’s Canadian Foothills Division. Graham holds
a Bachelor of Science degree in petroleum engineering from
the University of Wyoming.
Peter Young has worked in the oil industry for 34 years, mostly in
drilling, heavy oil, and experimental projects. He was a pioneer
in coalbed-methane drilling in Canada, worked on vapour-
extraction projects, worked on steam-assisted-gravity drain-
age in its infancy, and was involved in a unique in-situ coal-
gasification project.
Sheldon Harbinson is the Vice President of Sales for Concord
Well Servicing (a CCS company), leading the Canadian sales
teams of Concord, including all service offerings. He has 23
years of industry experience in the drilling and completions
area. Harbinson is a graduate of the Southern Alberta Institute of
Technology’s engineering science program. He worked on vari-
ous projects in parts of Southeast Asia, North Africa, Europe, and
South America at a small Canadian service company, progres-
sively gaining more-senior roles,eventually becoming Manager of
International Operations. Harbinson joined Landmark Graphics
in 1996 in their drilling and completions group, which later
became part of Halliburton. From 2000 through 2005, he worked
in Houston in a business-development role and then as the
Marketing Development Director for the drilling and comple-
tions group of Halliburton’s Landmark Graphics service line.
Then in 2005, Harbinson moved back to Canada as the Global
Account Manager for Encana before becoming the Canada
Manager of Business Development in January of 2009. In March
2011, he joined Concord (and CCS) as the company embarked
on a new growth and strategic-development path. Harbinson
has also served on the board of CSUR since 2010 and chairs the
CSUR Communications Committee.

May 2012 Journal of Canadian Petroleum Technology 175