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Natural Gas- Risk versus Return

A Natural Gas Extraction and Consumption Analysis

The natural gas movement continues to ride momentum as more onshore locations
around the world get the green light for exploration. Despite a variety of environmental risks and
concerns posed by current extraction methods, hydraulic fracturing remains on the forefront of
natural gas extraction and global leaders continue to invest in the technology, transportation, and
storage necessary to liquefy this precious worldwide commodity. The U.S. Department of
Energy predicts that annual natural gas consumption in the U.S. alone is projected to rise to 30.7
trillion cubic feet by 2025 and worldwide consumption of natural gas is anticipated to reach
roughly 151 trillion cubic feet by 2025. A wide variety of benefits can be credited for this
significant global rise in demand for natural gas. With its higher fuel efficiency, reduced
greenhouse gas emissions, and untapped abundance, it is evident why this clean-burning source
of energy is universally desirable.
Natural gas consists primarily of methane and smaller percentages of ethane, propane,
butane and nitrogen once it is liquefied. When used as a source of fuel, natural gas generates
fewer emissions of carbon dioxide, sulfur dioxide, nitrogen oxides, and particulate matter than
coal or oil (U.S. Department of Energy, 3). Due to an increased demand for these cleaner
emissions, the use of natural gas as energy generation has significantly risen, especially in the
United States where shale gas exploration is prominent. Natural gas is typically burned in
residential, commercial, and industrial settings today due to its comparatively small carbon
intensive composition and average energy efficiency of 92% (MIT, 99). Additionally, a significant
share of natural gas is used to generate electricity. A variety of advantages exist when replacing
coal-fired generators with natural gas, including lower capital costs, higher fuel efficiency,
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shorter construction lead times, and of course, fewer environmentally hazardous emissions (U.S.
Department of Energy, 2). Natural gas is a key component of the global movement to reduce air
pollution and greenhouse gas emissions, and does not indicate a major threat of running out any
time soon. The U.S. Energy Information Administration estimates that the U.S. alone has 2,543
trillion cubic feet of natural gas reserves, and crucial leaders in natural gas production including
Russia, Canada, and Iran are just as rigorous in their natural gas exploration (ANGA).
Hydraulic fracturing is the relatively new current method of natural gas extraction.
Hydraulic fracturing, or fracking, is a process by which a mixture of water, chemicals, and sand
is pumped at high pressure into a well to create fissures in shale through which gas can escape.
The well is drilled vertically to a desired depth, turned at ninety degrees, and then continued on
for several thousand feet until the trapped natural gas is reached. Energy development in the
United States has changed dramatically as a result of the introduction to hydraulic fracturing.
Some regions of the United States new to large-scale oil or gas production have become drilling
epicenters, and historically low gas prices are a direct reflection of production surges across the
United States (Steele, Hayes, 245). These economic boosts, as well as the clean reputation of
natural gas emissions are the frontrunners of the pro-fracking argument. Nevertheless, a great
deal of attention has been called to the environmental risks and negative impacts associated with
the practices of fracking. Subsurface contamination of ground water due to escaped methane,
contaminants, and fracking fluids have raised great concern for the quality of drinking water
(Zoback, Kitasei, and Copithorne, 7). Additionally, threats of faulty well construction, blowouts,
above-ground leaks and spills of waste water and chemicals are crucial contributors to the
controversy surrounding natural gas extraction.
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Risk versus return is the primary tradeoff shaping the debate surrounding natural gas and
hydraulic fracturing. While natural gas is a comparatively cleaner source of energy, the
questionable dangers and risks of extraction have certainly drawn attention to the breakthrough
in shale gas development.














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