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Gas to claim bigger share of energy market

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Natural gas will increase its share of the world energy market in the next dozen years, although it likely won't surpass coal as the primary source of electric power generation, according to a report prepared and released last month by General Electric.

"The integration of gas systems over the next decade is going to bring unprecedented flexibility to the gas market, driving significant institutional and market changes, but also opens the way for gas to capture a larger share of the energy demand," writes "The Age of Gas & the Power of Networks."

"Large-scale multi-billion ‘mega' pipeline and LNG projects will ‘anchor' future gas network growth. This is the traditional growth path to connect large supply sources with demand centers," the report says.

A chart in the report's appendix shows gas having 20 percent of the world's energy market in 1990 and 23 percent in 2012. It could increase to 26 percent by 2025. Coal was listed as 25 percent in 1990, 23 percent in 2012 and 26 percent in 2025. Oil was 36 percent in 1990, 31 percent in 2012 and 27 percent in 2025.

Thus, gas will be close to catching both coal and oil in about 12 years.

About half of gas production last year was used in power generation. That will increase to about 53 percent by 2025, the report says.

"The power sector will be the key driver of future gas demand growth," the report states. "As the world power systems expand, we anticipate that gas used to produce electricity will expand by 50 percent. Economic and environmental factors are driving the shift away from oil and coal toward natural gas and renewables in the power sector.

"There is a window of opportunity for gas to be developed profitably and still compete effectively against internationally-traded coal if it falls within the right competitive pricing range."

Expanding the role of gas will depend on investment, policy adjustments and coordination among companies and governments, the report says. Policy makers will need to pay attention the importance of growing gas networks, which the report calls horizontal growth, and facilitating linkages between various energy systems.

"Fostering an environment for innovation will also be critical," according to the report. "Tax credits and incentives in the early stages can be instrumental to encourage new supply development."

Strong regulatory practices combined with new ways to use gas networks could lead to a 50 percent reduction in gas flaring, a critical issue for the industry at present, the report says.